Intra-Day Significant Options Activity
ETF / Indices Mentioned: XLE, XLF
Stocks Mentioned: EMIS, GPS, JBHT, JBL, JEF, RRI, TSO, WYE, ZGEN
ETF / Indices
In the Energy Select Sector SPDR (XLE, 59.97, +2.09%) we are seeing primarily buyers of volatility through the April puts. For instance we noted buyers of 6,500 April 58/56 put spreads and buyers of 18,000 April 57 puts tied the ETF delta neutral.
Activity in the Financial SPDR (XLF, 36.21, -0.47%) continues to see primarily cautious put buying as investors have recently focused on the September cycle. More specifically, opening investors over the past two trading sessions have bought 60,000 September 35 (.33d) puts and 80,000 September 34 (.24d) puts (70k yesterday). These investors are buying downside volatility possibly in an effort to protect long delta positions. Top components of the XLF include C, BAC, AIG, JPM and WFC.
In Jabil Circuit Inc. (JBL, 25.49, -1.96%) we observed participants selling calls within the April and May option cycles. For instance, investors separately sold roughly 1,900 April 25 calls, 2,300 May 27.5 calls and 1,100 April 27.5 calls versus stock, delta neutral. Collectively, the call selling suggests investors look to profit in the event of decreased volatility along with limited upside in the stock.
Energy – Power Producer
In Reliant Energy Inc (RRI, 19.80, +0.81%) investors are once again in the market buying downside volatility. Today we noted opening buyers of ~5,000 August 20 (.37d) puts and ~1,000 May 19 (.36d) puts. We have seen similar order flow over the last week. While the downside buyers could be looking to protect long positions, the order flow implies expectations for increased movement over the next several months.
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In the Jefferies Group Inc (JEF, 29.00, +3.31%) opening investors bought 1,000 July 35 (.15d) calls paying $0.425. While they could be using the options to hedge short stock positions, they are likely be speculating on a significant upside move in the stock. Calls in JEF typically average around 200 contracts a session.
Order flow in Tesoro Corp. (TSO, 100.29, +1.15%) has picked up over the past two trading sessions as opening investors have bought a total of 5,000 May 100 (.48d) puts (2,500 yesterday). While getting long volatility, these investors could either be aggressively protecting long stock positions or speculating on a downside move heading into May expiration (5/19/07). TSO is estimated to report earnings on 5/4/07.
Over the last two days investors have been buyers of May volatility in Wyeth (WYE, 50.94, +1.19%). Today there are outright buyers of 2,500 May 50 (.63d) calls while two days ago we noted opening buyers of 7,500 May 50 puts tied to stock, delta neutral. Although we do not find the trading to be directionally indicative, it does suggest investors are looking for increased movement in the stock in the coming months. WYE expects the FDA to issue a decision regarding the approval of Viviant for post-menopausal osteoporosis prevention by 4/23/07 as well as an FDA decision on Pristiq for the treatment of vasomotor symptoms associated with menopause by 4/26/07.
Retail - Apparel
With takeover rumors circulating in Gap Inc (GPS, 17.93, +0.93%) we observed increased activity in the options today. We primarily noted buyers in both the 17.5 and 20 strike calls in April and May.
Options in Emisphere Technologies (EMIS, 3.27, -6.03%) rarely trade, however opening investors this morning sold nearly 1,500 September 5 (.28d) calls at $0.15. They are likely selling these calls against long stock (over-writing), which implies they are looking for limited upside movement and/or a decrease in implied volatility.
In Zymogentics Inc (ZGEN, 15.40, +0.46%) opening investors bought 3,000 November 15 calls/sold 3,000 January08 15 puts versus stock on a delta neutral basis. They are getting long November volatility and short January volatility, implying they are looking for increased movement in the stock prior to November expiration (11/17/07). ZGEN expects the FDA to issue an approval decision regarding rh Thrombin by 10/18/07.
Transportation – Trucking
In JB Hunt Transport Services Inc. (JBHT, 27.04, +2.08%) opening investors bought approximately 13,000 August 22.5 (.20d) puts paying from $0.80 up to $0.85, versus an average daily volume of fewer than 500 puts a session. While taking a long volatility stance, this is most likely an attempt to protect long stock positions heading into August expiration.
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