Intra-Day Significant Options Activity
ETF/Indices Mentioned: XAL
Stocks Mentioned: AMD, CMCSA, CSC, JNJ, KR, LBTYA, NXY, SAP, TXI
With the AMEX Airline Index (XAL, 54.48, +3.65%) trading up approximately 3% following positive news in component CAL this morning, opening investors entered the market to buy 4,000 June 55 (.50d) puts paying $3.30. The investors are positioning for increased levels of volatility and are likely speculating on downside in the sector between now and June expiration (6/16/07).
With unconfirmed takeover rumors circulating in Texas Industries Inc. (TXI, 76.10, +2.74%) opening investors aggressively bought April 80 calls over 1,800 times. Prior to today’s trading, TXI had a 21-day average daily call volume of fewer than 200 calls a session.
With Computer Sciences Corp. (CSC, 53.58, +3.60%) trending up approximately 2% this morning, opening investors entered the market to buy 3,000 June 57.5 (.20d) calls paying $0.50, equating to over three times the average daily call volume. These investors are likely positioning for upside above the $58 level ($57.5 strike + $0.50 premium) between now and June expiration. CSC is estimated to report Q4 earnings on 5/23/07, which falls within the June expiration cycle.
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We continue to see unusual volume in Comcast Corp (CMCSA, 26.29, +2.18%) options with predominantly buyers of volatility in both May and July. Today, opening investors bought 10,000 May 27.5 (.35d) calls paying up to $0.52. Late last week we saw buyers of 20,000 July 25 puts tied to stock. Overall it appears there is a clear sentiment that CMCSA could make a notable move in the coming months.
In SAP (SAP, 45.55, +1.0%) recent option flow, particularly today, suggests we could see a downside move in the coming week / months. Today, investors bought 5,000 April 45 puts for $1.00 and 2,500 May 45 puts for $1.70. In previous sessions, we have seen June 47.5 / 45 put spread buyers, September 50 put buyers and additional April 45 put buyers. Earnings are expected April 20th which is the last day to trade April options.
Options in Liberty Global Inc. (LBTYA, 34.18, +2.52%) trade fairly infrequently; however, this morning opening investors bought nearly 1,200 May 35 (.45d) calls. While buying at-the-money volatility, these investors may be speculating on an upside move, possibly in reaction to Q1 earnings estimated for 5/10/07. In comparison, LBTYA usually trades on average fewer than 300 contracts a session.
In Johnson and Johnson (JNJ, 60.75, +1.08%) we are seeing buyers of calls today in both the April and July cycles. For instance, seemingly bullish investors bought 12,000 April 60 (.70d) calls, which is equivalent to buying approximately 840,000 shares of stock. Separately we also noted buyers of July 65 calls/sellers of July 55 puts in risk reversals 5,000 times trading against stock on a delta neutral basis. Q1 earnings are coming up on 4/17/07.
In Nexen Inc (NXY, 60.73, -1.30%) options this week, we have seen April buyers and May sellers which is notable given the company earnings release date currently falls in the May cycle (4/26/07). Yesterday investors bought at least 600 April 95 calls for $0.85 and this morning investors bought 1,200 April 60 / May 65 call spreads for $.90. April volatility is trading approximately 2pts over May volatility (37% vs. 35%)
Retail - Food
In Kroger Co. (KR, 29.13, +2.03%) participants were noted selling upside volatility through roughly 6,000 May 30 (.34d) calls. We also observed increased volume last week as investors separately bought 2,000 October 30 calls and sold 2,000 of these same May 30 calls. Overall, this morning’s May call sellers profit in the event of decreased levels of volatility along with limited upside. KR typically trades on average fewer than 800 calls a session and is estimated to release Q1 earnings on 6/18/07.
In Advanced Micro Devices (AMD, 12.95, +0.9%) we are seeing volatility buying in April that may be perceived as bearish. Yesterday afternoon with the stock approximately $12.85, investors bought 50,000 April 12.5 puts outright for $0.40. The April 12.5 puts were bought again earlier today, 12,000 times, however they are trading against stock on a delta neutral basis.
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