Unusual Options Activity Review for Friday, January 11, 2013
Friday’s Bullish Trading
Research In Motion (RIMM) saw a flurry of activity Friday afternoon after Sprint confirmed that it would introduce RIM’s Blackberry 10. The stock is up $1.45 to $13.37 on blistering volume of 95 million shares. Meanwhile, 219,000 calls and 106,000 puts have traded on the Blackberry-maker so far. January $13 calls, which are now 37 cents in-the-money and expiring at the end of next week, are the most actively traded RIM options Friday. More than 24,000 contracts have changed hands. Expiring Weekly 12 calls, Weekly 13 calls, and January 12 calls are the next most active in RIMM and 30-day implied volatility in the options on the stock is moving up 3.5 percent, elevated at 83.
Bullish trading was also seen in Diana Shipping (DSX), Cheniere Energy (LNG), and News Corp (NWSA).
Friday’s Bearish Trading
A hefty block of options traded in TJX Friday. Shares of the retailer are up 19 cents to $43.92 and one investor sold 27,500 February 45 calls on the stock at 45 cents per contract. 36,170 contracts now traded and the activity will create the largest block of open interest in TJX. The largest existing OI in the name is 6,597 contracts in the Jan 42.5 calls. So, Friday’s hefty premium sale is unusually large for the name and seems to reflect expectations that shares will see limited upside in the weeks ahead. February options expire in five weeks. A shareholder with a large position in TJX common stock might have initiated the premium sale as part of a covered call or buy-write on the retailer.
Bearish trading was also seen in Melco Crown Entertainment (MPEL), Goodyear Tire (GT), and Linear Technology (LLTC).
Index Recap
CBOE Volatility Index (.VIX) continues to see a flurry of activity, as the index remains at the lower end of its recent range. The index, which tracks the expected or implied volatility priced into S&P 500 Index (.SPX) options, is up just .04 to 13.53 late-Friday. Yet, 633,000 calls and 107,000 puts have traded in the VIX pit so far. March 25 and 35 calls have seen a flurry of activity, with combined volume exceeding 200,000 contracts. Some investors have been buying the spread (buying 25s and selling 35s), according to a source on the exchange floor, and, if so, seem to be bracing for a substantial spike in market volatility in the weeks ahead.
Analyzing the ETF Market
SPDR Homebuilders Fund (XHB) ticks a penny higher to $27.75 and an interesting trade on the ETF late in the day is a Jun 28 straddle for $3.69, 4800X. That is, an investor apparently bought 4,800 June 28 puts on XHB for $2.03 and bought 4,800 June 28 calls for $1.66 per contract. The action looks opening because volume exceeds open interest in both contracts. If so, it’s not necessarily a bullish or bearish play on the homebuilding sector, but seems to express the view that XHB could see increasing volatility in the weeks/months ahead. An important risk to the long straddle strategy is from time decay. Falling implied volatility also works against it
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