Unusual Options Activity Review for Wednesday, January 16, 2013
Wednesday’s Bullish Trading
CBS calls were busy for another day. Shares lost 16 cents to $37.64 and total options volume on the stock was 27,000 calls and 4,055 puts. March 42 calls were the most actives. 11,165 traded against 889 in open interest. February 40, March 40 and March 41 calls on the media giant were busy as well. Tuesday and Monday, February 40 calls on CBS saw a flurry of activity and the action created more than 45,000 contracts in new open interest. At 47,273 the Feb 40 call was the second largest open interest in the name Wednesday morning. The timing of the increased interest is noteworthy, as CBS was trading up to $40.80 in the after hours Wednesday on news it will convert its Outdoors America unit into a Real Estate Investment Trust [REIT].
Bullish trading was also seen in SBA Communications (SBAC), IAM Gold (IAG), and SLM.
Wednesday’s Bearish Trading
Seagate Technology (STX) dropped 16 cents to $34.30 and options volume on the storage-device maker Wednesday included 32,000 puts and 17,000 calls. One spread drove much of the put activity, as one investor bought 9,200 Feb 34 puts on the stock for $1.63 and sold 9,200 Feb 32 puts at 85 cents. The February 32 ? 34 put spread, for 78 cents, traded 10,000X on ISE and data from the exchange is suggesting that an investor bought the spread (bot 34s, sold 32s) and is opening a new position. It’s a short-term bearish play that will offer its best payout if shares fall to $32 or less through the February expiration (in four-and-a-half weeks). Shares have rallied nearly 37 percent since November and the spread might have been initiated by a shareholder to help hedge or protect some of the gains heading into a Jan 28 earnings report.
Bearish trading was also seen in NYSE Euronext (NYX), Hain Celestial (HAIN), and Magna International (MGA).
Index Recap
CBOE Volatility Index (.VIX) continued its recent slide. The market’s so-called “fear gauge” dropped another .13 to 13.42 and is probing 5-year lows after the S&P 500 (.SPX) traded in a relatively narrow 6.36 point range and finished the day up just .29 to 1,472.63 Wednesday. VIX January options expired Wednesday and the settlement print was 13.69, meaning that Jan calls with strike prices of greater than 14 and puts with strikes of 13 or less expired out-of-the-money. Now, much of the focus in the VIX pit shifted to February term. February 20 calls and 15 puts were the most actively traded contracts on the volatility index. Total volume across all VIX options was 638,000 calls and 221,000 puts.
Analyzing the ETF Market
Puts on the iShares Long-Term Treasury Bond Fund (TLT) were busy Wednesday. Shares added 25 cents to $120.35 and total volume was 118,000 puts/15,000 calls. One spread trade drove a lot of the action, as an investor sold 13,700 January 124 puts on TLT at $3.80, bought 13,700 January 123 puts for $2.80 and bought 55,160 February 120 puts for $1.76. In other words, an in-the-money Jan 123 ? 124 put spread was sold at $1 and a large block of near-the-money puts was bought. January options expire at the end of the week and the investor might have been closing a position in the spread, while taking a new much larger position in the Feb 120 puts. If so, the activity seems to reflect the view that longer-term Treasury bond prices might fall, pushing yields higher, in the weeks ahead.
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