Unusual Options Activity Review for Wednesday, February 27, 2013
Wednesday’s Bullish Trading
EMC attracted increasing options activity Wednesday. The stock was up 34 cents to $23.28 on volume of 18.4 million shares. By way of comparison, average daily volume for the Hopkinton, MA data storage device-maker is 26. 4 million shares. Yet, while share volume was lackluster (which was the case throughout much of the equity market Wednesday), calls on EMC were busy. 22,000 contracts traded, which trounced the day’s put volume of less than 3,000 contracts. March 23 calls were the most active. 11,950 traded, including a flurry of activity for 44 and 46 cents per contract just after the opening bell. January 30, March 24, and April 23 calls were the next most actives in EMC Wednesday. There were no obvious headlines on the stock to explain the interest. Shares have not performed well lately, falling 9.4 percent since earnings were reported a month ago.
Bullish trading was also seen in Sprint (S), CH Robinson Worldwide (CHRW), and Marathon Petroleum (MPC).
Wednesday’s Bearish Trading
Whole Foods (WFM) was up $1.34 to $85.30 in active trading of 2.5 million shares and options volume on the stock was 4X the daily average, driven by two large block trades. Both traded within minutes of each other on the Chicago Board Options Exchange [CBOE]. First, a 16,200-contract block of March 92.5 calls traded on WFM at 10 cents per contract when the market was 10 to 14 cents. Then, 15,200 March 75 puts traded for 13 cents when the market was 7 to 13 cents. Looking at the activity, the two trades appear to be part of one large March 75 ? 92.5 bearish risk-reversal for 3 cents. Whole Foods shares were up Wednesday, but have dropped 12 percent since earnings were reported on 2/13. A shareholder might have initiated a risk-reversal in the March options to help hedge or “collar” a holding of WSM shares on concerns about further losses over the next 16 days.
Bearish trading was also seen in United Healthcare (UNH), Humana (HUM), and Tibco Software (TIBX).
Index Recap
Overall volume totals were light Wednesday, with about 14.6 million contracts traded across the exchanges, according to Trade Alert data. Average daily volume in the past month is 16 million. Trading was active in the index pits, however, and implied volatility fell sharply across many products. 785,000 calls and 958,000 puts traded on the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX) and other cash indexes. The S&P rallied 19.05 points to 1,515.99 and VIX dropped 2.14 points to 14.73. The NASDAQ Volatility Index (.VXN) was down 1.57 to 16.34, Dow Jones Industrials Volatility (.VXD) sank 1.66 to 13.15 and Russell 2000 Small Cap IV (.RVX) was down 1.55 to 18.47.
Analyzing the ETF Market
Dow Jones Transportation Average ETF (IYT) rallied nearly 3 percent to $106.64 Wednesday on strength in the transport names like railroad, airline, and trucking companies. IYT, which is an exchange-traded fund tracking the DJ Transportation Average, is back within striking distance of the record highs of $107.16 seen a little over a week ago. Some investors are possibly bracing for a pullback, however, as options volume in IYT was more than double the daily average and very lopsided Wednesday. 7,114 puts and 595 calls traded on the fund. April 101, 102, and 105 puts were the most actives.
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