Unusual Options Activity Review for Wednesday, December 19, 2012
Wednesday’s Bullish Trading
Oracle (ORCL) was a bright spot Wednesday, gaining $1.21 to $34.09, 52-week highs, in active trading of almost 58 million shares after the software-maker reported earnings after the closing bell Tuesday. Oracle reported a quarterly profit of 64 cents per share on $9.11 billion in revenues. Analysts were expecting 61 cents on $9 billion. Shares moved higher on the heels of the results and options volume was 4.5X the daily average after 164,000 calls/44,000 puts traded on the ticker. December 33 calls were the most actives. 47,620 contracts changed hands, with some investors possibly liquidating positions as the contract is now more than $1 in-the-money and expiring at the end of this week. June 35 calls were the second most actives and seeing some opening activity, as nearly 40,000 traded against 16,059 in open interest. January 34 and 35 calls on ORCL were also busy Wednesday and Jan 33s were the most active puts.
Bullish trading was also seen in Hartford (HIG), Harley Davidson (HOG), and Phillips 66 (PSX) .
Wednesday’s Bearish Trading
Herbalife (HLF) shares came under fire Wednesday afternoon after CNBC reported that Pershing’s Bill Ackman was short the stock. The news sent shares skidding to 52-week lows and, when the dust settled at the closing bell, HLF was down $5.16 to $37.34 on heavy volume of almost 20 million shares. Options volume was nearly 7X the daily average. 20,000 calls and 55,000 puts traded on the ticker. December 35 puts traded more than 11,000 contracts. December 40, 30 and 27.5 puts saw interest as well. December options expire at the end of this week and HLF might see additional volatility before the weekend. Ackman is expected to explain the motivation for his bearish view on the stock Thursday morning.
Bearish trading was also seen in Nuskin (NUS), Nokia (NOK), and LSI Logic (LSI).
Index Recap
CBOE Volatility Index (.VIX) bounced back to life on expiration Wednesday. VIX, which is sometimes called the market’s “fear gauge” because it rises during times of market panic and anxiety on Wall Street, rose 1.79 points to 17.36 after the S&P 500 Index tumbled 10.98 points to 1,435.81. The settlement value for the VIX December 2012 options, which was computed early in the day, was 16.69 (according to CBOE’s web site) and up from 15.05 at the November expiration. Now, players in the index market set their sights on the January VIX options. Of the 540,000 VIX options traded Wednesday, about 441,000 contracts, or 85 percent, was in the January expiration month. Jan 16 and 17 puts were the most actives, followed by Jan 16, 23 and 24 calls.
Analyzing the ETF Market
SPDR Industrials Fund (XLI) lost 21 cents to $38.25 and options volume on the ETF was 2.5X the daily average, with about 29,000 puts and 14,000 calls traded on the stock. The largest trade was a 13,750-contract block of March 27 puts traded for 88 cents per contract. An investor bought the puts, according to a source on the floor. At the end of the day, 14,000 contracts traded against 12,136 in open interest. An investor with a stock portfolio might have initiated the put position to help hedge exposure to the sector through the first quarter of 2013. XLI is one of nine sector funds that collectively hold all of S&P 500 names. It consists of all of the industrial companies like GE, United Technologies, and 3M.
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