Unusual Options Activity Review for Tuesday, November 6, 2012
Tuesday’s Bullish Trading
Devon Energy (DVN) might be a name worth watching Wednesday morning. The energy company is due to report earnings and is moving up $1.56 to $59.39 in active trading of 3.8 million shares ahead of the results. Overall options volume on the Oklahoma City, OK energy company is impressive, as about 24,000 calls and 8,500 puts traded in the name. November 62.5 calls, which are now 4.8 percent out-of-the-money and expiring in 10 days, are the most actives. 7,880 traded against 3,054 in open interest. November 60 and 65 calls were among the most actives in DVN as well. Some investors might be taking positions in these very short-term options on hopes for a post-earnings rally in DVN. However, shares fell 3.4 percent on 8/1 when the company last reported.
Bullish trading was also seen in General Motors (GM), Aetna (AET), and Calpine (CPN).
Tuesday’s Bearish Trading
Micron Technology (MU) added 25 cents to $6.09 in very active trading of 46 million shares and options on the memory-chip maker were busy as well. 14,000 calls and 32,000 puts traded in Micron Tuesday. The largest trade was a 10,720-lot of January 5 puts for 14 cents per contract. At the end of the day, 25,980 January 5 puts traded in Micron. The stock was mired near multi-month lows of $5.16 less than two weeks ago. It has rallied 18 percent since that time. The interest in Jan 5 puts might reflect concerns about another leg lower in the stock before the January 2013 expiration, which is in 73 days.
Bearish trading was also seen in Penn National Gaming (PENN), MGIC (MTG), and Amedisys (AMED).
Index Recap
CBOE Volatility Index (.VIX), which added .83 to 18.42 Monday, eased back .73 to 17.69 and there doesn’t seem to be a lot of fear reflected in the market “fear gauge” heading into the Presidential Elections. VIX tracks the expected or implied volatility priced into?S&P 500 Index (.SPX) options and the S&P is up 11.59 points to 1428.85. Overall volumes in the index market are light. 511,000 calls and 470,000 puts traded on the S&P 500 Index, VIX and other cash index products, which is only about 78 percent the normal levels, according to Trade Alert data. VIX November 16 puts, November 20 calls, and November 23 calls, which are set to expire two weeks from today, are the most actives in the index pits Tuesday.
Analyzing the ETF Market
Call options on the SPDR Financial Fund (XLF) have seen a flurry of activity over the past two days. 191,000 calls and 67,000 puts traded on the ETF Monday. Shares are up 17 cents to $16.14 Tuesday and the action continues. Another 246,000 calls and 57,000 puts traded in XLF so far. Weekly 16.5 calls, which are now 36 cents out-of-the-money with three days of life remaining, are the most actives. 85,160 traded against 55,082 in open interest. Weekly 17, November 16, November 17, and December 17 calls are seeing interest as well. High volume in upside calls on XLF might reflect positive sentiment towards the sector ahead of the elections. XLF is an exchange-traded fund that holds all of the financial-related companies from the S&P 500.
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