Options Order Flow Summary & Unusual Activity Alert: Universal Display Corp (PANL), Penwest Pharmaceuticals Co (PPCO) & Millennium Pharmaceuticals Inc (MLNM)
General Sentiment
Today's activity shows choppy trading with an early rally fading and broad averages down slightly at midday. Options volume is well below average as many market participants are off this week. Calls are outpacing puts slightly with call sellers and put buyers leading the flow.
Universal Display Corp (PANL)
We are following up from yesterday when call activity pushed this name to 30 times its recent volume. Today, the stock is lower by 2% and the flow has settled down to fewer than 1,000 contracts.
Call buyers continue to nibble with March 25 calls being the most active. Yesterday's activity led to new open interest of 1,400 March 25 calls. That strike may be worth watching for an accumulation of open interest.
Penwest Pharmaceuticals Co (PPCO)
This is a busy day for PPCO. Options activity in the name is already triple the normal average daily volume due to a large spread on the ISE. In this trade, a customer appears to have purchased 3,500 Jan 10 puts to close a short position and sold March 7.5 puts to open for a net debit of $2.00.
A look at PPCO trade history reveals that the Jan 10 puts were sold in early Oct for $1.80 when the stock was near $9.50. The stock dropped after November earnings and is now trading at $6.40. The put buyer looks to be taking the loss and rolling into March 7.5 puts with a view that the stock may recover.
Millennium Pharmaceuticals Inc
This biotech is also trading at triple its average daily volume today with significantly bearish flow. The stock is trading up a few cents to $15.14 and the options flow is dominated by put buyers focused on the Jan and Feb 15 strike.
Several sweep orders were used to buy 3,000 Feb 15 puts at $1 and Jan 15 puts at $.55. As expected, this buying activity caused implied volatility to lift several points. ISE data confirms that much of the put activity opened new positions and originated from customer accounts.
Posted By: Trade Alert
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About Henry Schwartz
Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.
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