Intra-Day Significant Options Activity
ETF / Indices Mentioned: XLF, VIX
Stocks Mentioned: HCBK, LEN, MIR, MLNM, MOT, NFLX, PHM, RRI, TOL, TSO
ETF / Indices
In the Financial Select Sector SPDR (XLF, 36.25, +0.25%) we continue to observe mainly buyers of volatility through the September puts. In total, investors have bought 60,000 September 35 (.33d) puts and 128,000 September 34 (.24d) puts (48k today). These participants are buying downside volatility possibly in an effort to protect long delta positions.
In the CBOE Volatility Index (VIX, 12.89, -0.31%) investors bought 30,000 May 20 (.20d) calls for $0.50. Recall, on Wednesday of this week (3/21/07) opening investors bought 10,000 April 14 calls for $1.725, with the VIX trading at approximately $13.50 level. These cautious investors are likely using the calls in order to protect long positions over the next several months.
Opening investors in Millennium Pharmaceuticals (MLNM, 11.42, +0.62%) are buyers of 2,500 August 12.5 (.65d) puts paying up to $1.60. While they are getting long volatility through these options, the delta of the put does indicate a bearish directional bias in the coming months.
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We are seeing buyers of May options in Netflix Inc (NFLX, 23.67, +2.46%) this with earnings on the horizon. Today opening investors bought 2,500 May 25 (.43d) calls in what is likely bullish speculation. Earlier this week we saw smaller sized buyers of the May 22.5 puts in seemingly protective trading. NFLX is estimated to report earnings on 4/23/07, in the May expiration.
Energy – Power Producer
Over the past couple weeks we have seen are sharp increase in options activity in both Reliant Energy (RRI, 20.46, -1.73%) and Mirant Corp (MIR, 40.21, +1.26%). In RRI the majority of order flow in the market had been buyers of volatility in both the May and August cycles up until yesterday afternoon, when sellers emerged. For example today opening investors sold 10,000 May 20 straddles. Yesterday we saw buyers of both the May and August 19 strike puts throughout the day but late in afternoon sellers of August 20 straddles entered the market. Today in MIR there are buyers of 5,000 May 37.5 (.25d) puts; in the past couple weeks most of order flow has been focused on the September cycle with a seemingly bullish bias.
In Hudson City Bancorp Inc (HCBK, 13.83, +0.14%) opening investors sold 2,000 October 15 (.40d) calls at $0.40. This is most likely over-writing activity, where investors sell out-of-the-money calls against their long stock positions. On a daily basis, calls in HCBK average under a 100 contracts traded a session.
We observed participants in a number of homebuilding products selling April volatility. For instance, in Toll Brothers Inc. (TOL, 29.36, -0.24%) investors sold roughly 10,000 April 30 (.46d) calls, while in Pulte Homes (PHM, 27.65, +0.58%) investors sold 10,000 April 30 (.24d) calls and in Lennar Corp. (LEN, 45.87, -0.52%) investors sold 10,000 April 45 (.29d) puts. Indicating no directional opinion, these investors appear to be speculating on decreased levels of volatility between now and April expiration (4/21/07).
Options in Tesoro Corp. (TSO, 100.98, +0.88%) are active for the third consecutive session as investors have primarily bought April and May volatility. This morning, investors bought approximately 2,000 April 105 (.40d) calls paying from $2.40 up to $2.50. Over the prior two sessions, investors bought a total of 5,000 May 100 (.48d) puts, and separately sold April 100 calls in smaller size. Although indicating no overall directional opinion, investors appear to be positioning for increased volatility over the next two months. TSO is estimated to report earnings on 5/4/07.
Options in Motorola Inc (MOT, 17.76, +1.49%) were active once again today but with predominantly buyers of calls. Specifically, opening investors bought 26,000 May (.32d) calls and 20,000 April 17.5 (.60d) calls. Recall that over the past several weeks we have seen more bearish flow with both buyers of puts and sellers of calls. Today’s activity does appear to be bullish."
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