Unusual Options Activity Review for Thursday, November 29, 2012
Thursday’s Bullish Trading
Options on Ford Motor (F) were active Thursday. The stock gained 28 cents to $11.53 in relatively brisk trading of 56 million shares and is now up 15.3 percent in a little more than a month. On the options front, 144,000 calls and 53,000 puts traded on the automaker Thursday. December 12 calls were the most actives after more than 30,000 contracts changed hands. Some of the largest blocks traded in morning action for 9 cents per contract when the market was 7 to 9 cents. December 12 calls on Ford are now 4.1 percent out-of-the-money and some investors were possibly taking positions in the contract on hopes the stock will roll higher through the company’s auto and truck sales update on Monday. January 11 and February 12 calls on Ford were very busy Thursday as well.
Bullish trading was also seen in Goodyear Tire (GT), Dollar General (DG), and Omnivision Technology (OVTI).
Thursday’s Bearish Trading
Supervalu (SVU) drops 52 cents to $2.28 in heavy trading of 17.5 million shares after Reuters reported that talks between the grocery chain and Cerberus about a sale of the company have stalled. The stock fell sharply in afternoon trading on the heels of the report and options volume on the stock jumped to 6.5X the daily average. 45,000 calls and 23,000 puts traded in SVU. December 3 calls were the most actives and the flow included a 6900-lot at a nickel per contract when the market was 5 to 10 cents. Open interest in the Dec 3 calls on SVU is 45,393 and the largest block of OI in the name. Some investors might have been liquidating bullish positions (selling-to-close) on the heels of the seemingly disappointing headline.
Bearish trading was also seen in Frontier Communications (FTR), Cemex (CX), and Herbalife (HLF).
Index Recap
CBOE Volatility Index (.VIX) slipped another .45 to 15.06 after the S&P 500 (.SPX) added 6.02 points to 1,415.95. Despite all of the media focus and political wrangling surrounding the “fiscal cliff”, there’s been relatively little movement in the VIX this week and also light volumes in the index market. 234,000 calls and 387,000 puts traded on the S&P 500 Index Thursday, which is only 80 percent of the recent daily average volume, according to Trade Alert data. Low SPX put volume and falling VIX are not consistent with any significant hedging activity. Instead, volumes and volatility tend to spike when portfolio managers are worried about the short-term market outlook and buy downside SPX puts as portfolio insurance. Despite the media hype, there seems to be no real fear about the fiscal cliff among index traders.
Analyzing the ETF Market
The largest blocks of options traded Thursday surfaced in afternoon action on the iShares Japan Fund (EWJ). Shares gained 11 cents to $9.36 on a day of modest strength across Asia’s equity markets and a block of 250,000 March 10 calls traded on EWJ for 11 cents per contract when the market was 10 to 11 cents. The trade printed about a half hour before the closing bell. About thirty minutes earlier, a 55000-contract blocks of March 10 calls traded on EWJ for 9 cents when the market was 8 to 9 cents. At the end of the day, an impressive 306,000 contracts traded against 32,000 in open interest. The March 10 call on EWJ is 6.8 percent out-of-the-money and, if a buyer initiated the trades, the flow seems to reflect a very bullish view on Japan’s equity markets.
—————————————————————————————————-
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the “”Disclosure Statement for Futures and Options”” prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.