Monday’s Bullish Trading
Radioshack (RSH) has seen an impressive rally over the past two days. The stock was up 58 cents, or 22 percent, to $3.22 Monday on heavy turnover of 14 million shares. By way of comparison, average daily volume over the past month has been under 3 million. RSH is on a two-day 39.4 percent surge, but there are no obvious headlines to explain the big increase. Investors in the options market seemed to take note Monday, however. 13,000 calls and 6,100 puts traded on the electronic retailer which is 7X the daily average. February, March and April 3 calls were the most actives and 30-day implied volatility in options on Radioshack was up 1.5 percent to 70, up about 7 percent in the past two days.
Bullish trading was also seen in Regions Financial (RF), Zynga (ZNGA), and Bed, Bath, Beyond (BBBY).
Monday’s Bearish Trading
Petsmart (PETM) dropped $6.36 to $63.63 on heavy volume of 7.3 million shares following an analyst downgrade Monday. Average daily volume is only about 750,000 shares. At the same time, options volume rose to more than 30X the daily average which was about 15,000 puts and 3,850 calls. The top trade was a spread in which the investor apparently bought 500 March 65 puts on PETM for $3.20 and sold 500 March 60 puts at $1.10. The stock was around $64.20 at the time and the spread traded for $2.1. Earlier, when shares were closer to $65.50, the same spread traded for $1.65, 488X. At the end of the day, both the March 60 and March 65 puts on PETM traded more than 4,800 contracts, as one or more investors might have been building a position in the spread throughout the course of the trading day. If so, they’re possibly bracing for additional losses in Petsmart shares heading into earnings, due out late-February.
Bearish trading was also seen in Herbalife (HLF), 3D Systems (DDD), and Nuskin (NUS).
Index Recap
Overall action in the index market was very light Monday, as trading was range-bound and seemed to lack any real conviction. The S&P 500 Index (.SPX) traded in a narrow 7-point range and lost 2.78 to 1,500.18. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected or implied volatility priced into SPX options, added .68 to 13.57. On the options front, 452,000 calls and 490,000 puts traded on the S&P 500, VIX and other cash index products, which is only 60 percent of the recent daily average volume, according to Trade Alert data. Volumes might pick up later in the week, however, when macro players react to headlines related to the Fed’s rate meeting Wednesday and key data like Friday’s employment report.
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