Mid-day Flow Summary: VIX & TIVO
CBOE Volatility Index (VIX)
VIX options are used by large institutions and tend to trade in bursts. The year to date daily option volume ranges from below 10,000 on quiet days to more than 270,000 contracts this year. This morning is above average, with 84,000 contracts on the tape and with activity focused on the July 20 calls.
As the VIX index is up slightly to 13.55, an apparent hedger has bought more than 30,000 July 20 calls, in a position that will payoff in a major market correction. The VIX index hasnít touched 20 since the market correction of 2002.
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TiVo Inc (TIVO)
Tivo will report earnings after the close today, and options on the stock are trading in anticipation of this news. While TIVO's average daily option volume is only 1330 contracts, todayís trading has put 4800 contracts on the tape. Nearly all of these contracts involve out-of-the money calls being purchased by customers.
The stock is trading near $6.29 and over 2000 July 7.5 calls have traded in the $.15 range. 1500 June 7.5 calls have also traded for $.10. The motivation for these low-cost short-dated upside calls could be a hedge to a short stock position or a low-cost bet on a significant positive reaction tonight.
General Sentiment
Among all listed options today (index, etf, and equity) approximately 1.4 million puts and 2.2 million calls have traded, for an industry put/call ratio of .64. The flow is slightly bullish, characterized by more call buyers and put sellers.
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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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