Unusual Options Activity Review for Wednesday, December 5, 2012
Wednesday’s Bullish Trading
Alpha Natural Resources (ANR) was up 11.3 percent to $8.07 in brisk trading of 23.7 million shares amid strength in the sector Wednesday. Market Vectors Coal Fund (KOL), which is an exchange-traded fund that holds shares of leading companies in the industry, was up 2.8 percent to $23.99. On the options front, ANR saw a flurry of activity. 34,000 calls and 5,820 puts traded on the ticker. Weekly 8 calls, which are now 7 cents in-the-money and expiring in two days, were the most actives in ANR. 8,930 traded against 4,787 in open interest. December 8, January 7, and January 9 calls on the coal producer saw brisk trading as well.
Bullish trading was also seen in Anadarko Petroleum (APC), Symantec (SYMC), and Stone Energy (SGY).
Wednesday’s Bearish Trading
Pitney Bowes (PBI) lost 15 cents to $10.88 and fell to new 52-week lows Wednesday. Options volume on the stock was 4X the daily average after about 19,000 puts and 715 calls traded on the maker of mail processing equipment. Much of the volume was due to one spread trade after the investor apparently sold 5,723 January $12 puts on PBI at $1.20 and bought 9,509 April 8 puts for 30 cents per contract. January $12 puts on the stock are now $1.12 in-the-money and have more than 25,000 in open interest, which is the largest block of OI in the name. It’s possible that Wednesday’s action closed out some of the open interest after the recent 24.2 percent drop in the underlying, while a new position is being opened in the April 8 downside puts on concerns about further weakness in Pitney Bowes in early-2013.
Bearish trading was also seen in Weyerhaeuser (WY), Limited Brands (LTD), and Nordstrom (JWM).
Index Recap
Overall options volumes increased from the very slow pace seen Monday and Tuesday. Nearly 10 million calls and 6.5 million puts traded across all the exchanges, which is much better than the average daily volume seen during the past month, according to Trade Alert data. Total daily average volume since early-November has been about 14.5 million contracts. Yet, volumes remain very light in the index market. 532,000 calls and 532,000 puts traded across the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX) and other cash index products Wednesday, which is only about 72 percent the average daily volume. SPX added 2.23 points to 1,409.28 and VIX, which tracks the expected volatility priced into SPX options, dropped .66 to 16.46. The light index volumes in the index market come amid come after several weeks of choppy market action. In fact, the S&P 500 is at the same levels Wednesday as it was two months ago. The seesaw action and lack of real vertical movement might have sidelined some index options heading into the seasonally slow period of late-December.
Analyzing the ETF Market
iShares Emerging Markets Fund (EEM) was up 45 cents to $42.34 in relatively active trading of almost 60 million shares and options on the ETF were busy as well. 187,000 calls and 116,000 puts traded in EEM Wednesday. The top trades were part of a spread, in which 23,350 Jan 43 calls traded on the ETF for 75 cents and 23,350 Jan 47 calls traded at 6 cents. If bought, the Jan 43 ? 47 call spread, for 69 cents, appears to be a bullish short-term play on the emerging markets and would offer its best payout if shares are trading at $47 or better through the expiration, which represents a 11 percent gain over the next 44 days. Global equity markets could see increased volatility before the weekend, as the Bank of England and the European Central Bank are meeting tomorrow. Key US jobs data are due out Friday morning.
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