Unusual Options Activity Review for Wednesday, January 30, 2013
Wednesday’s Bullish Trading
MetroPCS (PCS) saw unusual activity Wednesday. Shares were up 15 cents to $9.90 and options volume on the stock was very lopsided. 34,000 calls and less than 200 puts traded on the stock. The activity included a 20,000-lot of March 12 calls that were bought for 11 cents per contract, according to a source on the exchange-floor. At the end of the day, 20,303 contracts traded against only 10 contracts of open interest. February 10, February 11, and May 10 calls on PCS saw interest Wednesday as well. It’s not clear what is motivating the activity. PCS inked a deal to combine with Deutsch Telecom’s T-Mobile unit in October.
Bullish trading was also seen in Staples (SPLS), H&R Block (HRB), and Freescale Semiconductor (FSL).
Wednesday’s Bearish Trading
The largest blocks of options traded Wednesday surfaced in an unlikely name. Conoco Phillips (COP) finished the day down 57 cents to $61.09 and a hefty August 57.5 ? 47.5 put spread was bought on the oil giant for $1.80, 48700X. In this trade, the investor bought 48,700 August 57.5 puts on COP for $2.27 and sold 48,700 August 47.5 puts at 47 cents, according to a source on the exchange floor. More than 50,000 traded in both contracts. The activity will create the largest blocks of open interest in the name and the spread will offer its best payoff is shares tumble to $47.5 per share or below through the August expiration. The company was slated to release its earnings results Wednesday afternoon.
Bearish trading was also seen in Lockheed Martin (LMT), Newell Rubbermaid (NWL), and FTI Consulting (FCN).
Index Recap
Overall action in the index market was very light for a third day this week. 545,000 calls and 639,000 puts traded on the S&P 500 (.SPX), CBOE Volatility Index (.VIX) and other cash index products, which is 77 percent of the recent daily average volume, according to Trade Alert data. VIX, which tracks the implied volatility priced into SPX options, jumped 1.01 points to 14.32 after the S&P 500 lost 5.88 to 1,501.96. The volatility index has now increased by 15.2 percent in a little more than a week. The market’s “fear gauge” fell to multi-year lows of only 12.43 last-Tuesday and has been ticking higher in recent days ahead of key economic news, including jobs data on Friday.
Analyzing the ETF Market
Put options on the iShares Long-term Bond Fund (TLT) were actively traded Wednesday. Shares, which represent ownership in a basket of longer-term Treasury bonds, were down 20 cents to $116.75 and total volume on the ETF was 142,000 puts and 27,000 calls, which represents 3X the daily average for the product. Big spread trades drove much of the activity. For instance, at one point, an investor sold 23,000 February 120 puts on TLT at $3.60 and bought 26,750 March 116 puts for $2.10. The activity in the March 116 puts looks opening because volume exceeds open interest. Trade history indicates that large blocks of February 120 puts were opened on 1/15 and 1/16 when TLT was trading north of $120. Now, after the decline in shares during the past six trading days, the investor appears to be closing out the position in the in-the-money February puts, while opening a new one in March slightly out-of-the-money downside puts. If so, the position adjustment seems to reflect concerns about further losses for long-term Treasury bonds (higher yields) over the next 44 days.
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