Unusual Options Activity Review for Tuesday, January 15, 2013
Tuesday’s Bullish Trading
Symantec (SYMC) opened higher Tuesday morning on positive analyst commentary and then extended the gains in afternoon trading on news it is looking to sell its Altiris unit, a business it bought in 2007 for $800 million. The stock was up 92 cents to $20.82 and new 52-week highs on heavy volume of 13.8 million shares. Meanwhile, 23,000 calls and 2,985 puts traded on the security software-maker. February 22 calls were the most actives in SYMC Tuesday. 6,190 traded against 5,247 in open interest. January 20 calls, January 20 puts, April 23 calls, January 21 calls, and February 10 calls on Symantec were busy as well.
Bullish trading was also seen in Kinross Gold (KGC), Spectra Energy (SE), and Morgan Stanley (MS).
Tuesday’s Bearish Trading
Yelp shares dropped Tuesday afternoon after Facebook (FB) unveiled a new social search tool that could, among other things, find restaurant recommendations ? which is Yelp’s bread-and-butter. The stock was down $1.43 to $20.54 in heavy trading of 3.1 million shares on the news. Meanwhile, 9,777 puts and 3,779 calls traded in Yelp. January 20 puts, which are now 54 cents out-of-the-money and expiring at the end of the week, were the most active in the name. 4,089 now traded against 246 in open interest. Jan 21 calls and Apr 5 puts were the next most actives in YELP and implied volatility was up 6.5 percent to 74.
Bearish trading was also seen in Wellcare Health Plans (WCG), Jabil Circuits (JBL), and Health Net (HNT).
Index Recap
CBOE Volatility Index (.VIX) dropped .17 to 13.35 and is at the lower end of its recent range heading into expiration Wednesday. Unlike most other contracts, VIX options expire on Wednesdays instead of the Saturday following the third Friday of the expiration month. Trading in the options was active, with about 372,000 calls and 338,000 puts in the product so far. Tuesday will be the last day to trade VIX January options before the settlement value is computed Wednesday morning. As of this writing, there were 2.83 million calls and 1.14 million puts of open interest in the VIX Jan options. A stunning 2.79 million contracts, or nearly all, of the call options have strike prices of 14 or greater and would expire worthless if VIX settles at these levels (below 14) at the expiration Wednesday. On the flip side, only 7,842 contracts of the January puts have strike prices of 13 or less. So, most of the put options are in-the-money heading into the expiration.
Analyzing the ETF Market
SPDR Financials (XLF) is ticking 7 cents higher to $17.13 and a few noteworthy trades surfaced on the ETF Tuesday. The largest trade was a block of 45,000 January 20 calls that expire in 2014 for 26 cents per contract when the market was 26 to 29 cents. Open interest is 95,000 and so the activity might be a closing sale. Beyond that, big trades in XLF included a buyer of 35,000 April 16 puts for 29 cents and, separately, 20,000 March 17 puts for 44 cents. Another investor bought 7,500 March 17 straddles (both puts and calls at the Mar 17 line) for 98 cents per straddle. Implied volatility in XLF options is falling below 16 and the lower end of the recent range. Some investors are possibly buying premium on the view key earnings from the sector this week could potentially send volatility higher in the days/weeks ahead. XLF is a fund that holds all of the financial names from the S&P 500.
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