Friday’s Bullish Trading
Fusion-IO (FIO), a Salt Lake City, UT data storage company, is up 74 cents to $14.97 in active trading of 5.9 million shares and options volume on the stock is running 2.5X the daily average. 26,000 calls and 4,000 puts traded on the stock so far. The top trade is a 6,800-lot of Jun 16 calls for 65 cents per contract traded on the all-electronic International Securities Exchange. An investor bought the calls, to open, according to data from ISE. 14,000 Jun 16 calls now traded. Jan 13, Sep 14 and Jun 15 calls are the next most active in FIO. The stock took an 18 percent hit Wednesday on news two company co-founders were leaving the company. Some investors are possibly taking positions in upside calls on FIO on the view the decline was overdone.
Bullish trading was also seen in Molycorp (MCP), Diana Shipping (DSX), and Freescale Semi (FSL).
Friday’s Bearish Trading
AIG is off 17 cents to $43.90 and an Aug 45 ? Nov 47 call spread is sold on the stock at 25 cents, 35000X. The investor bought 35,000 August 45 calls on AIG for $1.86 and sold an equal number of Nov 47 calls at $2.11. Looking at trade history and open interest, the activity appears to be a roll. The Aug 45 calls have more than 37K in open interest and are apparently being bought-to-close today, while the selling of Nov 47 calls is opening. If so the spread is not necessarily a bearish play (there’s very little bearish flow across the market to report Friday), but seems to reflect expectations for limited upside for the stock. A shareholder might have initiated the spread to adjust a covered call or buy-write on AIG.
Bearish trading was also seen in Dendreon (DNDN), Western Refining (WNR), and Atlas Energy (ATLS).
Index Recap
A hefty spread trades in CBOE Volatility Index (.VIX) midday Friday. VIX is down .13 to 13 and an investor does the following: sells 73,000 VIX June 18 calls and buys 73,000 VIX June 25 calls, collecting 70 cents on the spread, while also buying 75,000 August 18 calls on VIX and selling 75,000 August 24 calls, paying about $1.12 for the spread. In other words, according to a source on the exchange floor, an investor sold the Jun 18 ? 25 call spread on the volatility index, 73000X, and bought the August 18 ? 24 call spread, 75000X. The activity probably rolls (closes June to open in August) a bullish position on the VIX out two months.
Analyzing the ETF Market
iShares MSCI EAFA Fund (EFA) is flat at $62.62 and an investor bought a July 58 ? 60 put spread on the ETF for 43 cents, 131,420X. That is, they bought 131,420 July 60 puts on EFA for $1.05 and sold 131,420 July 58 puts at 62 cents each. Looking at trade history of the two contracts, the spread might be a roll up in strikes. On April 26, an investor bought a block of Jul 58 puts in the exact same size (141,420 contracts) for $1.11 per contract. EFA is up almost 3 percent since that time and the position is being closed out, while a new block of puts is being opened in the July 60s. An investor with a portfolio of international stocks might have initiated the spread to adjust a hedge. EFA holds shares of companies from Europe, the Far East and Australasia.
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