Unusual Options Activity Review for Tuesday, January 8, 2012
Tuesday’s Bullish Trading
Vodafone (VOD) has seen two days of higher call activity. 62,000 calls and 3,140 puts traded on the British mobile phone telecommunications company Monday and the flow created more than 50,000 contracts of new open interest in the name (49K calls and 1,300 puts). Tuesday, shares lost 33 cents to $26.21 and active trading in the options on the stock continued. 22,000 calls and 4,550 puts traded on Vodafone Tuesday. July 28 calls were the most actives, 12,400 contracts traded against 1,746 in open interest. February 27 calls were the second most actives in Vodafone after 4,100 changed hands. The two days of heavy trading might be related to a story on a Wall Street Journal blog Monday about Verizon’s CEO stating that buying out its wireless joint venture with Vodafone is feasible.
Bullish trading was also seen in Kodiak Oil and Gas (KOG), National Oilwell (NOV), and Marvell Technology (MRVL).
Tuesday’s Bearish Trading
3D Systems (DDD) rallied to 52-week highs early Tuesday, but came under pressure mid-morning and finished down $2.02 to $58.65. The company was presenting at the widely watched Consumer Electronics Show [CES] Tuesday and possibly disappointed some investors with its new product offerings. For whatever reason, the stock came under pressure and options volume on DDD was 5X the daily average. 11,000 calls and 19,000 puts. January 55 puts were the most actives in the name. 2,868 contracts changed hands. The flow Tuesday (and Monday) also included put spread trading, as one or more investors were apparently buying the May 45 puts on the stock and selling the May 35 puts ? possibly opening a new position and bracing for a substantial decline in shares of the Rockhill, SC application software company in the months ahead.
Bearish trading was also seen in Constellation Brands (STZ), Fusion io (FIO), and Time Warner Cable (TWC).
Index Recap
CBOE Volatility Index (.VIX) hit a morning high of 14.29, but finished down .17 to 13.62 even as the S&P 500 index (.SPX) dropped 4.74 points to 1,457.15. VIX, which tracks the expected or implied volatility priced into SPX options, typically moves higher when the S&P ticks lower. The index strayed from that normal pattern Tuesday, however, and some investors seemed to view the weakness as an opportunity to initiate options plays on the volatility index. Trading was a brisk 539,000 calls and 202,000 puts in the VIX pit on the Chicago Board Options Exchange. February 17 and 20 call spreads were the most actives, with some sizeable Feb 17 ? 20 call spreads driving the flow in those two contracts Tuesday.
Analyzing the ETF Market
An impressive put spread trades in the SPDR Financial Fund (XLF) Tuesday. XLF, which represents ownership in shares of all of the financial-related names from the S&P 500, lost a nickel to $16.96. On the options front, 95,000 April 16 puts traded on the ETF for 36 cents per contract and 95,000 April $14 puts at an average of 8.5 cents. This hefty Apr 14 ? 16 put spread appears to be a new position because there is not much existing open interest in either of those two contracts. If so, an investor might have bought the spread on concerns about the outlook for the financial sector heading into earnings. Wells Fargo reports Friday and a number of large banks, including Citi, JP Morgan, and Bank of America, release results next week.
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