Intra-Day Significant Options Activity
ETF / Indices Mentioned: BKX
Stocks Mentioned: AHM, CBH, CFC, DCX, DPTR, GE, HK, LCRX, LTD, MIR, NDE, NYB, OSI, SAI, STMP, WM
ETF / Indices
Consistent with the order flow detailed in the financial names below, investors in the PHLX KBW Banking Index (BKX, 113.33, +0.2%) bought 1,440 May 102.5 puts this morning for $0.25.
In DaimlerChrysler AG (DCX, 83.84, -0.75%) we observed bullish activity as investors bought calls within the July and October maturities. Participants separately bought 750 each of the July 80 (.66d) calls, October 70 (.84d) calls and October 85 (.56d) calls. Additionally, over the past several weeks we noted investors buying several thousand of the October 80 (.67d) calls. DCX is undergoing a strategic review of its Chrysler unit, and is considering a possible sale of the unit as one of the strategies. The press has widely reported that several companies, including a few private equity firms and MGA, have submitted initial bids for the division, although DCX has not commented on any of these reports which typically cite unnamed sources. DCX has not set a timeline for the review, although the markets are widely expecting that the company will announce a decision regarding the future of Chrysler in the next few months. DCX is scheduled to report earnings on May 15.
In General Electric (GE, 34.77, -0.01%) there are buyers of upside volatility through both near term and long dated options today. In separate trading investors bought 20,000 April 35 (.50d) calls and 45,000 January09 40 (.37d) calls. GE is expected to release Q1 earnings on 4/13/07.
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Following an announcement that Stamps.com (STMP, 14.48, 0.63%) will announce earnings within the April option cycle, front month volatility buyers entered the market. The participants bought nearly 1,600 April 15 (.36d) calls paying up to $0.40 and separately bought approximately 700 April 15 (.68d) puts paying up to $1.15. This is increased volume as STMP trades on average fewer than 100 contracts a session. STMP is expected to release earnings on 4/19/07.
In Mirant Corp (MIR, 43.59, -1.11%) investors bought 10,500 September 40 puts against stock, delta neutral. Over the past month we have seen steady buyers of volatility in both the May and September expiration cycles with a seemingly bullish bias. Additionally, in the past week we have also seen primarily buyers of volatility in other names such as Exelon Corp (EXC), Dominion Resources (D), Reliant Energy (RRI), TXU Corp (TXU), NRG Energy (NRG), Entergy Corp (ETR) and American Electric Power (AEP).
Once again, we are seeing increased put buying recently in financial stocks that have exposure to the sub-prime mortgage market. In most names, put buyers have focused on buying April, although other months are bid as well.
American Home Mortgage (AHM, 20.11, -8.2%): As of midday today, investors bought at least 2,000 April 25 puts, 300 April 22.5 puts, and 1,000 April 20 puts. In the past week we have also seen buyers of May 22.5 puts, May 25 puts and September 20 puts.
Commerce Bank (CBH, 32.49, -1.5%): This morning, investors bought 2,500 April 32.5 puts and 1,000 May 32.5 puts. Overall, in the past few weeks the April 32.5 puts have been consistently bid.
Countrywide Financial (CFC, 33.66, -1.6%): This morning, investors bought 5,000 July 32.5 puts and 2,000 July 35 puts. Also today, a participant bought 3,000 May 32.5 puts (opening) to sell 3,000 April 35 puts (closing).
IndyMac Bancorp (NDE, 30.31, -3.0%): The option flow today is bearish involving not only put buyers but call sellers as well. In the past several days we have seen April 30 put buyers (including 2,000 today) while today there are April 25 put buyers too.
New York Community Bancorp (NYB, 17.51, -1.5%) The options are relatively quiet today, but in the previous two sessions opening investors bought 5,000 July 17.5 puts.
Washington Mutual (WM, 39.00, -0.6%): Opening in both strikes, investors bought 10,000 April 37.5 / 35 put spreads. Overall, in the past few weeks the April 37.5 puts have been consistently bid.
Oil – Exploration/Production
We are seeing increased activity in the options of Delta Petroleum (DPTR, 24.50, +0.99%) and in short investors appear to be looking for a notable move in the coming months. However a directional stance is not clear. Over the last two sessions investors have bought volatility position through ~5,000 June 30 calls and ~5,750 September 30 calls trading vs. stock, delta neutral. Last week we also saw buyers of the September 25 calls versus stock.
In Petrohawk Energy Corp (HK, 13.45, +1.74%) opening investors bought nearly 7,000 January08 15 calls tied to stock on a delta neutral basis. While the trading does not indicate a directional bias, it does show there are expectation for a notable move in the stock. HK call options typically trade less than 100 contracts a day.
In OSI Restaurant Partners Inc (OSI, 39.73, +0.48%) there are opening buyers of ~1,500 April 40 (.35d) calls paying up to $0.15. The call buyers are likely speculating on a notable near term upside move, above the current $40 cash deal for the stock. OSI scheduled a special meeting of stockholders to vote on the proposed merger agreement on 5/8. The merger is expected to close shortly after the special meeting, subject to approval of OSI’s stockholders at the meeting.
Retail - Apparel
Investors in Limited Brands Inc. (LTD, 27.03, +0.63%) enacted a large trade this morning where they bought 20,000 January08 35 calls versus stock, delta neutral. These investors expect to profit in the event of increased levels of long-term volatility.
Ahead of this Thursday's earnings in Lam Research Corp (LRCX, 50.37, +2.11%) we are seeing primarily sellers of volatility in both the April and May expiration cycles. For instance, investors sold ~2,000 April 50 straddles and bought 2,000 May 45 / January 45 put calendars. The near term volatility selling implies anticipation for limited movement as earnings approach.
Technology - Business Services
Options were active again in Saic Inc. (SAI, 17.00, -0.18%) as investors bought sold roughly 5,000 November 15 puts versus stock, delta neutral. Just yesterday, investors bought approximately 4,500 August 20 calls versus stock, delta neutral. Overall, the August investors expect increased levels of volatility heading into August expiration, while today’s order show expectations for decreased levels of volatility within the November option cycle. SAI trades on average less than 400 calls a session.
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