Unusual Options Activity Alert: Lehman Brothers (LEH) & OptionsXpress (OXPS)
Lehman Brothers (LEH)
Two brokerage names are seeing action midday Tuesday. Lehman Brothers (LEH) implied volatility is high amid stock weakness and increasing put volume. The stock lost ground on Monday after Standard & Poorís cut its rating on Lehman, Morgan Stanley (MS), and Merrill Lynch (MER). Today, the stock is again weak after the Wall Street Journal reported that Lehman might need to raise as much as $4 billion to shore up its balance sheet.
Midday Tuesday, LEH is down $1.83 to $32.00 a share, bringing its loss for the week to 13 percent. Trading in Lehman options is brisk, with 81,000 puts and 49,000 calls trading on the day. Players are stepping in and buying premium here, which is also driving up implied volatility [IV]. In the June at-the-money puts, for example, implied volatility is approaching 120 percent.
In addition, the increase in interest in LEH put options isnít limited to just today. The chart below shows the open interest over the past two weeks (prior to Tuesdayís trading session.) Interest in LEH puts has been building steady during that time, suggesting that some investors are wary and are buying protection against the risk of further downside in Lehman shares.
Click Here For The Full Sized Chart
OptionsXpress (OXPS)
While trading in Lehman has turned bearish, trading in online broker OptionsXpress (OXPS) is decidedly bullish. After hitting a low of $21.80 early in the day, shares are trading up $.35 to $22.62 on heavy volume.
In the options market, total volume is running nine times greater than normal with most of the activity focused on buying in the June 22.5 and June 25 calls. The unusual activity is being attributed to takeover chatter.
OXPS is an online broker focused on the trading of equity, ETF, and index options. It has long been mentioned as a possible takeover play in the consolidating area of online brokerage. So, the rumor is not a new one, but players are clearly reacting midday Tuesday.
Click Here For The Full Sized Chart
Posted By: Trade Alert
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About Frederic Ruffy
Frederic Ruffy is a Freelance Writer and Options Trading Strategist. In addition to writing market commentary and trading-related books and articles, Fred has also worked as an instructor, educating investors on advanced topics like measuring volatility, the benefits of sector rotation and the risks and potential profits from trading around earnings. His market observations are mentioned frequently in the financial press and he currently trades stocks, futures, and options in Salt Lake City, Utah.
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