Tuesday’s Bullish Trading
DISH Networks (DISH) was up $1.16 to $37.94 in active trading of 6 million shares after dropping 2.3 percent yesterday on news the company has made an offer to buy Sprint. DISH erased the losses today, and more, and options volume on the stock was 3X the daily average. About 14,000 calls and 1,300 puts traded in DISH options today. May 41 calls, which are 8.1 percent out-of-the-money and expiring in 31 days, were the most active. 4,235 contracts traded. June 45, May 38 and June 40 calls on DISH saw active trading as well and 30-day implied volatility in the options on the stock was down 5.5 percent, after a 12.5 percent spike the day before.
Bullish trading was also seen in Tibco Software (TIBX), Nordstrom (JWN), and Kodiak Oil and Gas (KOG).
Tuesday’s Bearish Trading
Arch Coal (ACI) is down 20 cents to $4.69, new 52-week lows, late-Tuesday and options volume on the stock is running 3X the daily average. About 30,000 puts and 6,000 calls traded on the coal producer. April and July 6 puts are the most active and the flow includes some spread trading. For instance, a 1500-lot of April 6 puts traded on ACI at $1.23 and at the same time a 1500-lot of Jul 6 puts traded for $1.58. The spread, for 35 cents, looks like a roll. That is, the investor had a position in April 6 puts and the contract is in-the-money heading into this week’s expiration. Rather than exercise the put, the position is being sold-to-close. Meanwhile, a new position in July 6 puts is being bought-to-open, possibly on concerns about additional losses in ACI in the months ahead.
Bearish trading was also seen in GM, Avon Products (AVP), and Smithfield Foods (SFD).
Index Recap
Implied volatility was broadly lower and trading was active in the index market Tuesday. CBOE Volatility Index (.VIX), which tracks the expected or implied volatility of S&P 500 Index (.SPX) options, was up 5.04 points to 17.10 yesterday, but gave back 3.29 points to 13.98 today. NASDAQ Volatility Index (.VXN) gave back 1.44 to 15.723 and Dow Jones Volatility Index (.VXD) was down 2.65 to 12.51. Total volume across VIX, SPX and other cash indexes was about 1.2 million calls and 825K puts, according to Trade Alert data. A lot of that was in the VIX pit, as today was the last day to trade April options on the volatility index before a settlement print is computed Wednesday morning. 1.2 million contracts traded on VIX today.
Analyzing the ETF Market
The oil service space might be worth watching later this week, as one of the biggest names in the sector will be reporting earnings. Schlumberger (SLB) is slated to report Friday morning. Trading in Oil Service HOLDRS (OIH) was interesting today ahead of the results, as volume was 3X the daily average. 17K calls and 12K puts traded on OIH today. April 41 calls, which will have one trading day of life remaining after SLB reports, were the most actives in OIH. 14,590 traded, as it appears that some investors were paying 20 and 40 cents per contract to open new positions. Oil Service HOLDRS is a type of exchange-traded fund that holds leading companies from the sector. SLB accounts for nearly 20 percent of the fund’s portfolio.
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