Monday’s Bullish Trading
North American Palladium (PAL), a Toronto-based metals company, saw unusually high volumes Monday. The stock was up 29 cents to $1.72 on turnover of almost 10 million shares. By way of comparison, average daily volume in the stock is 1.5 million shares. Meanwhile, 14,000 calls and 613 puts traded in the name, or 17X the daily average. January 3 calls were the most active. 6,595 contracts changed hands. September and January 2 calls on PAL were actively traded as well. It’s not clear what motivated the activity, but it might have been in reaction to rising prices in the metals markets. Both Palladium and Platinum prices, two of the company’s key markets, move higher Monday. PAL, meanwhile, was up 20.7 percent on the session, but still 37 percent below the levels seen a year ago.
Bullish trading was also seen in Sysco (SYY), Verifone (PAY), and Kinder Morgan (KMI).
Monday’s Bearish Trading
US Steel (X) dropped 78 cents to $18.72 in active trading of 8.9 million shares and options on the steelmaker were busy Monday. 18,000 calls and 62,000 puts traded in US Steel. A large four-way spread drove some of the put activity after an investor sold 7,000 July 18 puts on the stock at $1.21, bought 17,000 July 13 puts at 16 cents, bought 5,000 October 16 puts for $1.09, and sold 5,000 October 10 puts at 14 cents. Looking at trade history and open interest in these four contracts, it appears that the investor was rolling out of a July 13 ? 18 put ratio spread that was opened in January. They were then opening a new position in an October 10 ? 16 put spread for 95 cents, 5000X. If so, the position adjustment seems to reflect concerns about additional losses in US Steel shares, even as the stock dropped to new six-month lows Monday.
Bearish trading was also seen in Astex Pharmaceuticals (ASTX), Southern Copper (SCCO), and NewsCorp (NWSA).
Index Recap
Implied volatility was broadly higher across the options market, but volumes were light Monday. For instance, CBOE Volatility Index (.VIX), which tracks the expected or implied volatility [IV] priced into S&P 500 options, was up .88 to 13.58 after the S&P 500 dropped 7.02 points to 1562.17. Meanwhile, RVX (the VIX for the Russell 2000 Small Cap Index) rallied 1.54 to 17.72, VXN (NASDAQ IV Index) rose 1.20 to 14.48 and VXD (Dow implied volatility) rose .57 to 12.26. Yet, trading in the index market was light. 418,000 calls and 379,000 puts traded on SPX, VIX and other cash indexes, which is less than half of the daily average seen in March, according to Trade Alert data.
Analyzing the ETF Market
SPDR Healthcare Fund (XLV) is one of nine Select Sector Funds and was the best performer among those nine funds during the first quarter. XLV, which holds all of the healthcare names from the S&P 500, rose 14.2 percent in the first three months of 2013. Shares displayed relative strength again Monday, gaining 6 cents to $46.07, new record highs ? even as the S&P 500 lost 7 points. On the options front, volume in the healthcare ETF Monday was 3X the daily average after about 16K calls and 16K puts traded on the fund. The top trade was a 9000-contract block of June 45 puts for 77 cents per contract when the market was 75 to 77 cents. An investor possibly bought the position as a protective put to help hedge recent gains in a portfolio of healthcare names after the push higher in the first quarter.
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