Wednesday’s Bullish Trading
Shares of Blackberry (BBRY) saw a late-day spike and finished up $1.18 to $15.65 on surging volume of 79 million shares on a report that a “mysterious” partner had ordered 1 million Blackberry 10 smartphones, with shipments beginning immediately. The stock saw an afternoon spike as the report made the rounds and options volume in BBRY approached 300,000 contracts. 181,000 calls and 107,000 puts traded in the name. March 14, 14.5 and 15 calls saw a flurry of activity and 30-day implied volatility in BBRY was little changed, but remains elevated around 90.
Bullish trading was also seen in Dollar General (DG), EMC, and Rackspace (RAX).
Wednesday’s Bearish Trading
Valero (VLO) lost $2.13 to $43.42 in heavy trading of 20 million shares on an analyst downgrade Wednesday and has now shed 10.5 percent after hitting multi-year highs a little more than a week ago. Trading in the options on the oil refiner was very active as well. 26,000 calls and 21,000 puts traded in the name. March 43 puts, March 44 puts, March 44 calls, and March 45 calls, which expire at the end of the week, were among the most actives. Not all of the flow seemed bearish, however, as two of the top trades of the day in VLO appeared to be part of a spread, in which the investor bought 1,500 April 47 calls on the stock for 68 cents and sold 1,500 April 50 calls at 22 cents. The spread, for 46 cents, is possibly a short-term bullish play in anticipation of a rebound in the stock through the April expiration.
Bearish trading was also seen in MEMC (WFR), Cognizant Technology (CTSH), and Aeropostale (ARO).
Index Recap
Overall options volumes were very light Wednesday. A total of 12.5 million contracts traded across the exchanges, according to Trade Alert data. Average daily volume in the past month is about 15.5 million contracts. But activity is likely to pick up Thursday and Friday due to the expiration. It is a quarterly or “Quadruple Witch” quarterly expiration, which happens four times a year when futures, futures options, single stock futures and equity options are all expiring. Thursday will be the last day to trade March options on many cash index products like the S&P 500 Index (.SPX). There wasn’t much happening Wednesday, however, as the S&P 500 traded in a narrow 8-point range and added 2.04 points to 1,554.52. VIX lost .44 to 11.83 and remains mired near 5-year lows.
Analyzing the ETF Market
Puts on iShares Long-term Treasury Bond Fund (TLT) were busy for a third day. Shares were off 12 cents to $115.59 and 70,000 puts traded on the ETF, compared to 13,000 calls. Spread trading drove much of the activity, after an investor sold 9,100 TLT March 116 puts on TLT at 93 cents to buy 9,100 April 112 puts for 77 cents. The same Mar 116 ? Apr 112 put spread traded on TLT 55,000X Monday, 24,000X Tuesday and 30,000X Wednesday. Open interest numbers indicate that a position is being rolled. That is, the investor was holding March 116 puts and covered (sold-to-close) those contracts, while opening a new position in April 112 puts. The activity over the past three days has been impressive in size and seems to express the view that Treasury bonds might suffer further losses, yields will rise, through the April expiration.
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