Unusual Options Activity Review for Wednesday, January 23, 2013
Wednesday’s Bullish Trading
Nabors Industries (NBR), a Bermudian oil and gas driller, rallied to session highs of $16.94 in afternoon trading and finished up 47 cents to $16.30 on heavy volume of more than 16 million shares on news a recent filing disclosed that Paplona Capital has taken an 8.8 percent stake in the company. Shares rallied around the headline and options volume was 7.5X the daily average. Approximately 23,000 calls and 4,500 puts traded in Nabors Industries. February 16, 17 and 18 calls were the most actives in the name and 30-day implied volatility rose 12 percent to 36.5. Attention will next turn to the company’s earnings, due out the afternoon of February 19.
Bullish trading was also seen in Skyworks Solutions (SWKS), Safeway (SWY), and US Airways (LCC).
Wednesday’s Bearish Trading
Xerox (XRX) added a nickel to $7.58 in relatively active trading of 10 million shares and options volume on the stock was 3X the average daily ahead of earnings. The maker of copiers, printers, and other IT services is due to release results tomorrow morning. 11,000 calls and 2,650 puts traded on the stock ahead of the news. February 7 puts, which are 7.7 percent out-of-the-money and expiring in 23 days, were the most actives in XRX. 9,278 contracts traded against 997 in open interest. Implied volatility in the options was up 8 percent to 33. The stock fell 5.1 percent on 10/23 and lost 6.8 percent on 7/20 in reaction to earnings news. Some shareholders might be taking out positions in short-term downside puts on the stock on concerns about another negative reaction after the company reports tomorrow.
Bearish trading was also seen in Mattel (MAT), Computer Associates (CA), and Exelon (EXC).
Index Recap
Not much was happening in the index market Wednesday. The S&P 500 Index (.SPX) traded in a 6.2-point range and finished up 2.22 to 1494.78. CBOE Volatility Index (.VIX), which tracks the expected volatility priced into SPX options, traded in a very narrow .37-point range and finished up .03 to 12.46. The twelve most active index contracts of the day were options on VIX. April 20 calls and February 30 calls were the most actives, with more than 50,000 traded in both. Total volume in the VIX pit was 750,000 contracts. SPX volume was about 690,000 contracts. Therefore, there was more activity in a product based on the volatility of the S&P 500 compared to the SPX itself.
Analyzing the ETF Market
Options on the SPDR Technology Fund (XLK) were busy Wednesday. Shares were up 31 cents to $29.78 with help from post-earnings gains in IBM and Google. Meanwhile, options volume on the ETF was 5.5X the daily average, with 110,000 calls and 3,200 puts traded in XLK Wednesday. February 30 calls, which are 22 cents out-of-the-money and expiring in three-and-a-half weeks, traded nearly 80,000 contracts. March 31 calls were the second most actives. 28,180 contracts changed hands. It’s not clear what motivated the surge of call activity in XLK. The fund holds all of the tech-related names from the S&P 500 and one big name, Apple, is out with earnings Wednesday after the close. The initial reaction is negative, as the stock fell to $489 after the company posted mostly in-line first quarter results, but guided down estimates for the second quarter.
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