Mid-day Flow Summary
Dendreon Corp (DNDN)
DNDN continues the roller-coaster ride today as stock is off 58% to $7.38 on negative FDA news. More than 350,000 contracts have traded in the first 90 minutes of trading, placing the stock in front of both QQQQs and SPX index options for current total volume.
Majority of the volume in DNDN options appears to be closing ‘cleanup’ trades made by those who rode the stock from 5 to 23 and back again over the past weeks. Nearly 20,000 May 17.5 Calls have traded for 5 cents, as some of the 63,000 contracts of open interest are closed down for maximum profit.
Also seeing a general volatility crush as more than 36,000 May 7.5 Calls have traded and implied volatilities have come from 200 to current mid 100s- suggesting a belief that the excitement in the name may be over.
Majority of the volume in DNDN options appears to be closing ‘cleanup’ trades made by those who rode the stock from 5 to 23 and back again over the past weeks. Nearly 20,000 May 17.5 Calls have traded for 5 cents, as some of the 63,000 contracts of open interest are closed down for maximum profit.
Also seeing a general volatility crush as more than 36,000 May 7.5 Calls have traded and implied volatilities have come from 200 to current mid 100s- suggesting a belief that the excitement in the name may be over.
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CBOE Volatility Index (VIX)
VIX is derived from the implied volatility of certain industry-benchmark SPX index options. As a result, it is considered an indicator of institutional expectations for future market volatility. In general, a market crash leads to a dramatic VIX increase, and quiet market expectations equal a low VIX.
The current VIX level is 13.10, generally above the past year when 10-12 was the range. During the 500 point correction in February, VIX hit 18.5 very briefly. Today’s interesting activity involves the June 20 Calls where a very large block of 35,000 were bought for approximately 42 cents to create new open interest. This trade suggests one well-capitalized participant placing a short-term general ‘hedge’ against a market correction such as we experienced earlier this year.
The current VIX level is 13.10, generally above the past year when 10-12 was the range. During the 500 point correction in February, VIX hit 18.5 very briefly. Today’s interesting activity involves the June 20 Calls where a very large block of 35,000 were bought for approximately 42 cents to create new open interest. This trade suggests one well-capitalized participant placing a short-term general ‘hedge’ against a market correction such as we experienced earlier this year.
About Henry Schwartz
Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.
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