Unusual Options Activity Review for Wednesday, February 20, 2013
Wednesday’s Bullish Trading
Joy Global (JOY) has seen a flurry of options activity Wednesday. The stock was up $3.31 to $66.85 in heavy trading of 7.45 million shares after the company’s Chief Executive Officer responded to recent takeover talk surrounding the company at an investor conference. CEO Michael Sutherlin stated that Joy will “do the right thing for shareholders,” according to Bloomberg. The comments were apparently sufficient to spark a rally in shares of the Milwaukee-based machinery company and options volume on the stock was running 4X the daily average. 25,000 calls and 14,000 puts traded in the name so far. March 65, March 70 and March 72.5 calls were among the most actives and 30-day implied volatility in JOY is moving up 13 percent to 43.
Bullish trading was also seen in Vodafone (VOD), Wendy’s (WEN), and Medicines Company (MCO).
Wednesday’s Bearish Trading
Anglogold (AU) drops $1.22 to $25.51 and new 52-week lows amid weakness in the mining names after gold suffered another big loss Wednesday. The price of the precious metal shed $26 to $1578 and dropped to levels not seen since the middle of the summer. AU, a South African mining company, is trading down along with the metal and options volume on the stock is 10X the daily average. 30,000 calls and 2,800 puts traded on the stock. The top trades are part of a spread, in which the investor bought 2,500 April 34 calls, bought 7,000 April 33 calls and bought 3,000 Apr 31 calls, while selling 7,000 June 28 calls on AU. Looking at open interest, the activity appears to be rolling. That is, the investor was short the April contracts and is covering the position, while now writing June calls with a lower strike price to open a new position. A shareholder with a position in the stock might have initiated the trades to adjust a covered call strategy in the name. 13,790 June 28 calls have now traded on the gold miner against 69 in open interest.
Bearish trading was also seen in First Energy (FE), Forest Oil (FST), and Golden Minerals (AUMN).
Index Recap
Implied volatility in the options market is moving mostly higher Wednesday. CBOE Volatility Index (.VIX), which tracks the expected or implied volatility priced into S&P 500 Index (.SPX) options, closed at five-year lows yesterday. VIX is up 1.03 points to 13.34 late-Wednesday. VXN tracks the IV of NASDAQ 100 Index (.NDX) options and is up .66 to 14.08. There’s been some rather big moves in implied volatility in the options on the US Oil Fund (USO) and SPDR Gold Trust (GLD). OVX, which tracks the oil fund IV, is up 1.76 points to 24.20. GVZ tracks the implied volatility of GLD options is up 1.50 points to 17.25.
Analyzing the ETF Market
Wednesday’s market decline seems to have stirred up a bit more put activity in the SPDR 500 Trust (SPY) which is an exchange-traded fund that holds the same names as the S&P 500. Shares are off 81 cents to $152.44 and total options volume is 1.05 million puts and 515,000 calls, a ratio of almost two-to-one. Weekly 150 puts that expire on 3/1 are the most active. Volume is approaching 97,000 contracts. The contract expires on March 1, which coincides with the government’s deadline to avoid “sequester”, or the $85 billion in spending cuts. Some investors are possibly buying the 150 puts on Spiders to hedge the risk of further market declines ahead of the event risk.
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