Thursday’s Bullish Trading
Altera (ALTR), a San Jose, CA semiconductor equipment company, was up 10 cents to $33.30 and options volume on the stock was lopsided, as 11,000 calls and 250 puts traded in the name Thursday. September 37 calls, which are 11.1 percent out-of-the-money, were the most active in ALTR. 5,640 traded. May 33 and June 22 calls were busy as well. It’s not clear what was motivating the heightened activity and, interestingly, peer Teradyne (TER) saw high call volumes yesterday. Two days of increased call activity in ALTR and TER comes ahead of earnings from the leader in the space ? Applied Material (AMAT). The company is out with results this afternoon and, after posting better-than-expected results, the stock is ticking higher in extended hours trading.
Bullish trading was also seen in Diana Shipping (DSX), Conagra (CAG), and Micron Technology (MU).
Thursday’s Bearish Trading
Harmony Gold (HMY) lost 3 cents to $4.08 and is down 54.5 percent year-to-date amid persistent weakness in the yellow metal. Gold lost another $11 to $13.85 today. On the options front, November 4 and 5 call options on HMY saw increasing volume on spread trading. For instance, in morning action, 1,250 Nov 4 calls traded on the gold mining company at 56 cents when the market was 55 to 60 cents. Meanwhile, 1,250 Nov 5 calls traded for 30 cents when the market was 25 to 30 cents. The spread, at 26 cents, traded 17800X on the day and seems to be reflecting the view that HMY will be below $4 through the November expiration. The activity is possibly part of a type of call writing strategy against a stock position in the battered gold miner.
Bearish trading was also seen in Console Energy (CNX), Huntsman (HUN), and Willbros (WG).
Index Recap
The late-day decline in the equity market failed to stir up much volatility in the options market. For example, CBOE Volatility Index (.VIX) was up just .26 to 13.07. VIX tracks the expected volatility priced into a strip of S&P 500 Index (.SPX) options. NASDAQ Volatility Index (.VXN), which is derived from implied volatility of NASDAQ 100 Index (.VXN) options, dropped .16 to 13.72. Implied volatility on the Gold Fund, as measured by GVZ, and the Oil Fund (OVX), also moved lower Thursday. At the same time, trading was active due to the expiration. 739,000 calls and 983,000 puts traded across the index products.
Analyzing the ETF Market
A big spread trade surfaced in the SPDR Financial Fund (XLF) late-Thursday. XLF lost 13 cents to $19.69 and an August 19 ? 17 put spread was bought on the ETF for 32 cents, 73500X. That is, the investor bought 73,500 Aug 19 puts on XLF for 41 cents and sold 73,570 Aug 17 puts at 9 cents. The hefty spread appears to be a new position in XLF options, as volume is exceeding open interest in both contracts. If so, it’s a short-term bearish strategy that offers a max payout if XLF falls to $17 or less through the expiration, which represents a 13.7 percent decline over the next three months. A portfolio manager with substantial holdings in financial names might have initiated the spread as a type of hedging strategy. XLF holds all of the financial-related names from the S&P 500.
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