Intra-Day Significant Options Activity

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ETF / Indices Mentioned: PKB, PPH, SMH, SOX, XLF, XLV
Stocks Mentioned: ADI, CC, ENER, FRO, DSL, MRVL, PPCO, SMTC, SVVS, TSO, UNH, WLP

ETF / Indices
Options in the PowerShares Dynamic Building and Construction (PKB, 18.39, -0.38%) very rarely trade but today opening investors bought 20,000 September 20 (.65d) puts paying $1.95. This is equivalent to selling approximately 1.3 mln shares of the ETF. The share equivalency of the trade is particularly interesting given that its 50-day ADV is approximately 25,000 shares.

We are seeing May call buyers in both the semi ETF’s and Indices alongside May call buyers in several semi equities (highlighted below). In the Semiconductor HOLDRs Trust (SMH, 35.63, +2.92%) investors bought ~30,000 May 37.5 (.23d) calls and ~8,000 May 35 (.65d) calls. In the PHLX Semiconductor Index (SOX, 485.43, +2.96%) there are buyers of 500 May 500 (.33d) calls and 300 May 490 (.48d) calls.

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Throughout this week we have seen increased call activity in the Financial Select Sector SPDR (XLF, 37.00, +1.20%). Today there are opening buyers of 50,000 September 37 (.57d) calls. Earlier this week we saw buyers of 70,000 May 37 calls and investors were also opening buyers of the soon to expire April 36 and 37 strike calls. In recent months the majority of order flow that we have seen in the XLF has been buyers of protective puts. On Monday, alongside the surge in call activity, we highlighted a large spread where investors rolled their protective positions from the April 35 puts to the May 35 and 36 strike puts.

In the Healthcare Select SPDR (XLV, 35.81, -0.2%) and Pharmaceutical Holds Trust (PPH, 83.49, -0.3%) we have recently reported seeing bullish April call buying (alongside similar flow in several components); however in the past few days the trend has changed as investors bought puts and sold calls. In the XLV on Monday investors sold 1,000 April 35 calls (likely closing) to buy 1,000 May 36 puts (opening). Today in the XLV investors bought 2,000 May 36 puts. Similarly in the PPH this week, investors bought 4,000 May 80 puts and yesterday an investor bought 2,500 August 80/75 put spreads vs. selling 2,500 August 90 calls. While the flow in XLV and PPH imply investors may have a cautious stance, we continue to see call buyers in equities such as Bristol-Myers Squibb (BMY), Wyeth (WYE) and Pfizer (PFE).

Batteries
Ahead of tomorrow’s conference in Energy Conversion Devices Inc (ENER, 39.61, +4.51%) we are seeing bullish order flow in the April options. Specifically, opening investors bought ~6,000 April 40 (.35d) calls.

Healthcare – HMO
In both United Health Group (UNH, 54.43, -0.35%) and Wellpoint Inc (WLP, 84.84, +0.93%) we are seeing buyers of upside April calls. In UNH investors bought ~12,000 April 55 (.40d) calls while in WLP investors bought ~7,000 April 85 (.50d) calls. With April options expiring at the end of this week, the trading indicates they are looking for a near term move.

Oil Refining
In Tesoro Corp (TSO, 107.34, -1.29%) today there is bearish option flow. This morning, opening investors bought 2,000 April 110 puts (up to $3.50) and 1,800 May 110 puts (up to $6.60). Early this afternoon, investors bought puts and sold calls in the May 100p / 120 risk reversal, at least 500 times. Yesterday we saw May 105 put buyers and we believe investors are long 5,000 May 95 puts from spreads that traded last month.

Oil Shipping
In Frontline (FRO, 35.47, +1.5%) opening participants bought 2,000 May 35 (.42d) puts paying up to $1.05. Given the recent strength (+21.0% in past four weeks) the investors may be speculating there is going to be a downside move.

Pharmaceutical
In Pennwest Pharmaceuticals Co (PPCO, 11.68, -2.18%) we are seeing repeat buyers of the April and May calls, mostly in the 12.5 strike, coupled alongside sellers of the May 12.5 strike puts. We have seen similar bullish order flow on several occasions over the past month. Late last month for example, May and June 10, 12.5 and 15 calls were heavily bid.  Today’s bullish order flow comes alongside recent strength in the stock. PPCO is up ~8.8% over the last 5 trading days. Q1 earnings are next Thursday (4/26/07).

Retail – Consumer Electronic
In Circuit City Stores Inc (CC, 18.68, -0.95%) we are seeing buyers of the 17.5 strike puts across the board in seemingly cautious trading. Today investors bought ~1,500 July 17.5 (.30d) puts and ~3,500 October 17.5 (.32d) puts. Last Friday we also saw buyers of the April 17.5 puts.

S&L Thrifts
In Downey Financial Corp (DSL, 66.45, +2.75%) there is bullish order flow in the options. In separate trading investors bought ~1,500 May 60 (.80d) calls and ~350 May 65 (.60d) calls. We also noted sellers of ~1,000 May 60 (.20d) puts. The bullish trading comes amidst today’s strength on the heels of earnings.

Semi
We are seeing May call buyers in several Semi names. In Marvell Technology Group (MRVL, 17.24, +1.06%), investors have bought approximately 20,000 May 17.5 (.47d) calls over the past two days.  In Analog Devices Inc (ADI, 37.50, +3.50%) opening investors bought ~4,500 May 40 (.30d) calls today and earlier this week we saw buyers of the May 35 calls. Yesterday, we also observed similar trading in peer ST Microelectronic (STM) with buyers of the May 22.5 calls. 

We are also seeing similar trading in Semtech Corp (SMTC, 14.34, +3.90%) where opening investors are buyers of ~3,000 June 15 (.42d) calls. These options very rarely trade, having a 21-day average daily call volume of less than 20 contracts.

Telecom
In the rarely traded options of Savvis Inc (SVVS, 48.92, unch) there are opening buyers of 1,400 May 50 (.55d) puts. The downside put buying comes ahead of Q1 earnings release next Wednesday (4/25/07).
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