Unusual Options Activity Review for Friday, January 4, 2012
Friday’s Bullish Trading
Dryships (DRYS) rallied 25.4 percent to $2.17 per share on heavy volume of 28 million shares amid notable strength in the dry bulk shipping names Friday (FRO, GNK, DSX, and EXM also saw large percentage gains). DRYS rallied and options volume rose to 15.5X the daily average. 24,000 calls and 7,075 puts traded on Dryships. January 2 calls, which are now 17 cents in-the-money after Friday’s rally, were the most actives. 8,539 contracts changed hands. January and March 2.5 calls were the next most actives and implied volatility in DRYS was up 3 percent to 71. It’s not clear what motivated the higher volumes, but the strength seemed to be part of a larger trend seen in the dry shipping space Friday.
Bullish trading was also seen in Lear Corp (LEA), Cheniere Energy (LNG), and Anolog Devices (ADI) .
Friday’s Bearish Trading
Health Management Associates (HMA), the Naples, FL hospitals company, was down 10 cents to $9.45 and options volume on the stock hit 15X the daily average. About 13,000 puts and 450 call options traded in the name. Much of the flow was in the January 9 puts, where 11,620 contracts traded against 321 in open interest. One player bought 9000 contracts for 15 cents per contract, according to a source on the exchange floor. If so, the trade is somewhat unusual. January 9 puts on HMA are now 4.8 percent out-of-the-money and expiring in two weeks. There was no news on the stock to explain the activity Friday.
Bearish trading was also seen in Acme Packet (APKT), Mako Instruments (MAKO), and ARM Holdings (ARMH).
Index Recap
CBOE Volatility Index (.VIX) continued its recent slide. The index, which tracks the expected volatility priced into S&P 500 Index (.SPX) options, lost another .73 points to 13.83 Friday. For the week, the index lost nearly 9 points, or 39 percent, after setting six month highs of 22.72 Friday. The volatility index imploded, as the S&P 500 rallied 4.6 percent and scored its best weekly gain since 2011. Trading in the VIX pit was active throughout the week and the activity slowed a bit. Still, 435,000 calls and 239,000 puts traded on the index Friday. January 21 calls and March 29 calls were the most actives in the product.
Analyzing the ETF Market
Market Vectors Junior Gold Miners Fund (GDXJ) saw an impressive amount of activity Friday. As noted in the midday, players gobbled up February 20 calls on the stock in the morning hours. Shares were just below $20 at the time. The trend continued in the second half of trading. The ETF had rallied back to positive territory and closed up 22 cents to $20.11. Options volume was 10X the daily average. 85,000 calls and 4,425 puts traded in GDJX. The February 20 calls led the way. More than 67,000 contracts traded against 2,642. It’s not clear what was motivating the interest, as the yellow metal has been down over the past two days. The flow in the GDXJ Feb 20 calls also seemed to include of mix of both buying and selling. For whatever reason, it seemed that investors were opening positions in anticipation of the next move in shares of the small cap mining names that comprise the ETF.
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