Unusual Options Activity Review for Friday, December 28, 2012
Friday’s Bullish Trading
Macy’s (M), the department store chain, was bucking the bearish trend Friday. The stock closed up 28 cents to $37.60 in active trading of over 6.3 million shares. Meanwhile, 16,000 calls and 1,750 puts traded in Macy’s options Friday. January 28 calls, which are 40 cents out-of-the-money and expiring in three weeks, were the most actives. 9,100 contracts changed hands against 2,367 in open interest. January 37 and 39 calls on the retailer were seeing interest as well. It’s not clear what was motivating the increased activity, but calls on Macy’s were also busy two days ago. 11,000 calls and 2,130 puts traded on the stock Wednesday. Many retailers will report December monthly same store sales next Thursday, but Macy’s is not typically one of them. Still, the higher call volumes might express optimism about the company and its 2012 holiday sales results.
Bullish trading was also seen in American Eagle (AEO), Expeditors International (EXPD), and American Vanguard (AVD).
Friday’s Bearish Trading
While Macy’s (M) saw increasing call activity Friday, its department store rival Saks (SKS) saw increased put volume. Shares of the New York-based company closed down 7 cents to $10.22. Options volume was running 3X the daily average. 6,880 puts and 360 calls traded in Saks Friday. January 5 puts that expire in 2014 were the most actives. 3,192 traded against 3,880 in open interest, including several smaller lots for 30 cents per contract when the market was 25 to 30 cents. The activity might be closing, as these puts are now 51.8 percent out-of-the-money. May 11 puts on Saks were also actively traded Friday. 3,136 contracts changed hands so far.
Bearish trading was also seen in Aeropostale (AEO), Home Depot (HD), and Humana (HUM).
Index Recap
CBOE Volatility Index (.VIX) closed up 3.25 to finish 22.72, closing at its best levels since mid-June amid ongoing anxiety about fiscal cliff negotiations. The market’s so-called “fear gauge” tracks the expected or implied volatility priced into options on the S&P 500 Index (.SPX), which was down 15.67 points to close 1,402.43 and has suffered a five-day 2.7 percent losing skid. VIX, meanwhile, has rallied nearly 35 percent since 12/18. Yet, players in the options market don’t seem too impressed with the big move in the index, as volume in the VIX pit was very light Friday. 150,000 calls and 129,000 puts so far, which is only about 63 percent of the daily average volume over the past month, according to Trade Alert data.
Analyzing the ETF Market
SPDR Technology Fund (XLK) lost 32 cents to $28.36 and 25,000 January 30 call options traded on the ETF Friday for an average of 6.5 cents per contract. Open interest is 21,828 and the block of calls coincided with 5,000 January 29 calls for an average of 30.5 cents per contract. Taken together, the activity appears to be part of a 1X5 call ratio spread (sold the 29s and bought the 30s) on XLK ? an advanced play that will pay off if shares see a dramatic rally beyond $30 through the Jan expiration, which is now just three weeks away. There is also risk to the spread if shares settle between $29 and $30, with the max loss suffered if the position is left open through the expiration and shares settle at $30. If shares settle at $29 or less, all of the calls expire worthless and any debit paid for the spread is also at risk if the position is left open through the expiration.
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