Unusual Options Activity Review - RIG, MRVL, RRC, PTV, ORCL, AKAM, MET, PRU, SPX, FXI
Posted on 7/30/2010 in Unusual Activity by Joseph Cusick
Bullish Flow
An impressive spread trades in Transocean (RIG) Thursday. Shares of the oil driller added 62 cents to $47.39 and one investor sells 30,000 February 65 calls and buys 15,000 of the February 55 calls and 15,000 February 80 calls. This call butterfly spread was bought at a $3 debit and is an aggressive trade on RIG. It makes its best profits if shares rally to $65, or 37.2 percent, through the February 2011 options expiration. Separately, another investor (or maybe the same) was active in November calls - buying 19,500 November 45 calls, selling 19,500 November 55 calls, and buying 9,750 November 65 calls. Like the butterfly, this spread targets the middle strike, or $55 per share by the November expiration.
Bullish order flow was also seen in Marvel Technology (MRVL), Range Resources (RRC), and Pactiv (PTV).
Bearish Flow
Oracle (ORCL) shares came under fire late Thursday on headlines the software maker is being sued by the Department of Justice for alleged software contract fraud. Shares, which had traded towards $24.25 early, finished the day down 58 cents to $23.70. In the options market, trading activity picked up as well, with 40,000 puts and 11,000 calls traded in the name. August 23 puts were the most actives, with 14,789 traded. About 80 percent of those puts traded at the Ask and so it appears that skittish investors were buying puts on concerns about additional weakness for Oracle shares in the weeks ahead. August 24 puts traded 13,800X.
Bearish flow also picked up in Akamai (AKAM), MetLife (MET), and Prudential (PRU).
Index Trading
At risk of sounding like a broken record, volume remains very light in the index market. There's not much to write about. Approximately 218,000 calls and 315,000 puts traded across the S&P 500 Index (SPX) and other cash indexes Thursday, or 53 percent the recent average daily volume. Many institutional investors, who drive a lot of activity in the index pits when they use index puts to hedge portfolios, are on vacation this time of year. In addition, August is sometimes a quiet month for financial markets and portfolio managers are less motivated to buy index puts when expectations are for quiet trading. However, that might soon change. September and October are historically the most volatile months for the equity markets.
ETF Trading
iShares FTSE Xinhua China Fund (FXI), which holds shares in a number of Chinese companies, finished the day down 9 cents to $41.09 and a bearish trader surfaced in the exchange-traded fund Thursday morning. The investor bought 15,600 August 40 - 38 put spreads at 35 cents and sold 15,600 August 43 - 45 call spreads at 24 cents. The spread, at an 11-cent net debit, offers a $1.89 pay-off (excluding commissions) if shares fall to $38 or less by the August expiration (22 days). The risk is $2.11, plus commissions, if shares rally beyond $45 during that time.
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