Friday’s Bullish Trading
An impressive spread trades in Dow Chemical (DOW) Friday. Shares are up 57 cents to $31.41 in afternoon action and a block of 45,000 January 40 calls traded on the stock for 49 cents when the market was 45 to 48 cents while 45,000 January 45 calls traded at 12 cents when the market was 11 to 15 cents. In this trade, it appears the investor bought the Jan 40 ? 45 call spread on the chemicals company for 37 cents, 45,000X. The spread has traded 50,000X on the day and seems to be a rather aggressive bet that DOW will be trading north of $40.37 by January 2014, or 27.3 percent above current levels. Shares have already rallied 14.5 percent off mid-November lows.
Bullish trading was also seen in Home Away (AWAY), Las Vegas Sands (LVS), and Caesars Entertainment (CZR).
Friday’s Bearish Trading
Vodafone (VOD) saw impressive options volume Friday. Shares of the British telecom giant are up 44 cents to $25.02 and attempting to rebound after an 8-day 11.2 percent slide sent shares down to new 52-week lows yesterday. In options action today, one investor sold a hefty block of 30,000 July 29 calls at 30 cents per contract. Open interest at that strike is 32,138 and today’s call write (sale) possibly closes an existing position. Looking at trade history, it appears that 15,000 were opened on 1/24 and 15,000 more on 2/12. The investor might have been bullish on the stock, but is throwing in the towel on hopes for a rally after the stock’s most recent set back. Overall volume in VOD Friday is very lopsided – 64,000 calls and 1,100 puts.
Bearish trading was also seen in Kimberly Clark (KMB), Vertex Pharmaceuticals (VRTX) and Fortinet (FTNT).
Index Recap
After the substantial spike seen Wednesday and Thursday, implied volatility is easing across much of the options market Friday. The S&P 500 (.SPX) is up 12.72 points to 1,515.14 heading into the closing bell and CBOE Volatility Index (.VIX), which tracks the expected volatility priced into SPX options, is down .97 to 14.25. VIX hit a 5-year low of only 12.31 Tuesday before surging 23.6 percent over the next two days to 15.22. Meanwhile, the NASDAQ Volatility Index (.VXN) is down .75 to 15.75 today. Implied volatility on the Dow, as measured by the Dow Jones Volatility Index (.VXD), dropped 1.04 to 12.64. Crude oil volatility (OVX) jumped 2.16 to 27.13 yesterday, but gave back 2.55 to 24.58. Lastly, gold volatility (GVZ) slipped another .64 to 16.26 after declining 1.89 points yesterday.
Analyzing the ETF Market
Vanguard Emerging Markets Fund (VWO) is seeing more options interest than usual. Shares, which tumbled 2 percent Wednesday through Thursday, are ticking 15 cents higher to $43.97 late-Friday. Earlier in the day, an investor bought a position in a whopping 49,000 April 43 puts on VWO for 92 cents per contact. 60,500 contracts have now traded and the activity appears opening. In fact, today’s volume in the April 43 puts exceeds the total open interest in all of the options strikes in VWO. An investor with a substantial portfolio of stocks from emerging or developing economies might be buying the downside puts as a short-term hedge. The contract is 2.2 percent out-of-the-money and expiring in eight weeks.
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