Thursday’s Bullish Trading
MGM saw a day of brisk trading. The stock was up 3 percent to $15.14, new 52-week highs, on increasing volume of 23 million shares after a Street analyst upgraded the stock to Buy before the opening bell Thursday. On the options front, about 64,000 calls and 7,800 puts traded on the casino operator. Weekly 15 calls, which expire after tomorrow, were the most active in MGM. 10,775 contracts traded against 3,889 in open interest. The biggest trade was a 633-lot for 11 cents per contract ten minutes into the trading session. The same calls were trading late in the day for 35 cents per contract. May 15, Jan 17, Jun 15, Jun 16, and even Jan 22 calls on MGM were busy today as well.
Bullish trading was also seen in Micron Technology (MU), MGIC Investments (MTG), and Qlik Technologies (QLIK).
Thursday’s Bearish Trading
Food company Conagra (CAG) sees unusual activity Thursday. The stock dropped 48 cents to $35.05 and midday trades included almost 7,000 May 35 puts, which were bought for an average of 17.5 cents per contract, according to a source on the exchange floor. Open interest in the strike is 621 contracts. The interest seems somewhat unusual because May options will expire at the end of next week. At the end of the day, 11,297 contracts traded and the bid-ask was 30 to 35 cents per contract. About 12,000 puts and 900 calls traded on CAG today, or 6X the daily average.
Bearish trading was also seen in Rosetta Stone (RST), JDS Uniphase (JDSU), and ZAGG.
Index Recap
Trading was a bit more active in the index market and implied volatility was mostly higher today. About 815,000 calls and 834,000 puts traded on the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX), and other cash indexes, which is slightly more than the recent average daily volume for the index market, according to Trade Alert data. The S&P 500 slipped after notching 5 consecutive record high and lost 6.02 points to 1,626.67. In options action, 459,000 calls and 581,000 puts traded on the S&P. May and June 1600 puts were the most actives in the SPX pit. Meanwhile, VIX, which tracks the expected or implied volatility priced into S&P 500 options, was up .47 to 13.13. 265,000 calls and 134,000 puts traded on the volatility index. VIX May 18 calls and May 13 puts were the most actives.
Analyzing the ETF Market
A hefty spread trades in the iShares Emerging Markets Fund (EEM) midday Thursday. Shares are down 39 cents to $43.84 late and July 40.5 ? 42 put spread is bought on the ETF for 28 cents, 94000X. That is, the investor bought 94,000 July 42 puts on EEM for 66 cents per contract and sold 94,000 July 40.5 puts at 38 cents. If opening, the hefty put spread seems to reflect a cautious or bearish view on EEM, as it offers its best payoff if shares fall to $40.5 or less through the July expiration, which represents a decline of 7.6 percent over the next 71 days. A portfolio manager with a large portfolio of stocks from developing economies like China, Russia and Brazil might have initiated the spread as a type of short-term hedging strategy.
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