Wednesday’s Bullish Trading
Tesla Motors (TSLA) might be a name worth watching in coming days. The company’s founder and CEO Elon Musk sent out a tweet to his followers earlier in the week saying the company was going to make an exciting announcement on Thursday, but then pushed it back to Tuesday of next week. The stock was up 30 cents to $38.16 ahead of the news Wednesday. Meanwhile, 18,000 calls and 4,165 puts traded on the electric vehicle-maker. The largest trades were part of a spread, in which the investor bought 5,000 April 40 calls on the stock for 60 cents and sold 5,000 April 45 calls at 2.5 cents. The spread traded, for 57.5 cents, traded on ISE and data from the exchange is consistent with an opening spread purchase. If so, it’s a short-term play, as April options expire in 23 days. A short seller with a position in TSLA might have initiated the spread as a type of hedge ahead of the announcement. A large chunk (65 percent of float) of Tesla shares was in the hands of short sellers as of 12/31/2012.
Bullish trading was also seen in Southwest Energy (SWN), Intel (INTC), and Diana Shipping (DSX).
Wednesday’s Bearish Trading
Oracle (ORCL) shares were up 41 cents to $31.95 Wednesday and are attempting to stabilize after losing nearly 12 percent since reporting earnings a week ago. The most active options in ORCL were the April 31 puts, which are 3 percent out-of-the-money and expiring in a little over three weeks. 13,124 contracts traded against 9,299 in open interest. The top trade was a 1250-contract block for 31 cents per contract when the market was 30 to 31 cents. At about the same time, a 1000-contract block traded for 32 cents apiece. It’s not clear what motivated the increased interest. Some investors are possibly taking protective put positions in ORCL for fear of further losses in the shares over the next few weeks.
Bearish trading was also seen in Xilinx (XLNX), YPF Sosiedad Anonima (YPF), and American Axle (AXL).
Index Recap
Trading was choppy Wednesday, but at the end of the day, volumes were light and things were little changed. The S&P 500 dropped .92 points to 1,562.85 and remains within striking distance (2.3 points) of record levels. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected or implied volatility of S&P 500 options, was up .38 to 13.15. Overall options in SPX, VIX and other index products was just 619K calls and 452K puts, or 62 percent the recent daily average, according to Trade Alert data. The low volume stands in stark contrast to last week, when VIX had a record-setting trading day Tuesday when 1.39 million contracts traded in the product.
Analyzing the ETF Market
SPDR Financial Fund (XLF) was off 9 cents to $18.16 and put volume in the exchange-traded fund trounced call activity Wednesday. 219,000 puts and 11,000 calls traded in XLF.? The top trade was part of a spread in which the investor apparently bought 15,000 May 17 puts on XLF for 14 cents, sold 30,000 May 16 puts at a nickel, and bought 15,000 May 15 puts at 2 cents. The activity has all the characteristics of a May 15 ? 16 ? 17 put butterfly spread for 6 cents, 15000X. If so, it’s an advanced options play that will offer its best payoff if XLF falls to $16 (11.9%) through the May expiration. A fund manager with holdings in financial names might have initiated the spread as a type of short-term hedge. XLF is one of nine sector funds and holds all of the financial-related names from the S&P 500.
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