Unusual Options Activity Review for Thursday, November 1, 2012

Thursday’s Bullish Trading
Four of the five most actively traded equity options Thursday were call options on Bank of America (BAC). Shares gained 4.5 percent to $9.74 and were the best gainers in the Dow Jones Industrial Average amid a broad market rally. 26 of the Dow 30 stock posted gains on the session. Meanwhile, BAC Weekly 9.5 calls, which are now 24 cents in-the-money and expire after Friday, were the day’s most actively traded stock options contract. More than 54,000 contracts traded. In addition, volume in Jan 10 calls on the bank topped 52,000. November and December 10 calls were very busy as well. At the end of the day, about 394,000 calls and 102,000 puts traded on Bank of America, a ratio of almost four-to-one.

Bullish trading was also seen in Ford Motor (F), Credit Suisse (CS), and Titanium Metals (TIE).

 

Thursday’s Bearish Trading
Green Mountain Coffee Roasters (GMCR) saw an afternoon spike on increasing volume of more than 8 million shares after the company announced plans for a partnership with Costco to launch single cup brew K Cups under the Kirkland name brand. The stock finished up $2.16 to $26.34 and options volume in GMCR was 101,000 contracts. Not all investors seemed to share the bullish sentiment towards the company, however, as Weekly (11/9) $25 puts were the most actives in the name Thursday. 11,200 contracts traded against zero contracts in open interest. The largest trade was a 4000-lot for 85 cents per contract when the market was 78 to 88 cents, possibly a buyer opening a position on concerns the stock will give back the day’s gains through the end of next week.

Bearish trading was also seen in Sony (SNE), Avon (AVP), and Exelixis (EXEL).

 

Index Recap
CBOE Volatility Index (.VIX) dropped 1.91 points to 16.69 and has now given back about 56 percent of the 25.3 percent surge seen during the volatile period from 10/18 to 10/23. Thursday’s drop comes as the S&P 500 rallied 15.43 points to 1,427.59. Focus turns to key monthly jobs data Friday morning and then Presidential elections next week. There doesn’t seem to be too much anxiety building ahead of the events. Overall options volumes in the index market have been light this week. Thursday, for example, 551,000 calls and 678,000 puts traded on VIX, SPX and other cash index products, which is mostly in-line with the average daily volume for the index pits these days. VIX November 16 puts were the most actives in the index market Thursday. Nearly 40,000 contracts traded.

 

Analyzing the ETF Market
Call options on the SPDR Financials (XLF) were actively traded. Shares, which represent ownership in all of the financial-related names from the S&P 500, gained 20 cents to $16.09 and a noteworthy trade in morning action was a block of 50,000 Weekly (11/9) 16 calls on the ETF for 21 cents per contract. An investor bought the calls, according to a source on the exchange floor. At the end of the day, 50,337 contracts traded against zero open interest. It wasn’t the most active XLF contract of the day, however. That honor goes to the Nov 17 calls. 77,470 changed hands. Volume in the Nov 16 calls on XLF topped 46,000. At the end of the day, 250,000 calls and 94,000 puts traded on the ETF Thursday.

 

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