Options Flow Summary: AA & RIO
Alcoa Inc (AA)
The flow yesterday indicated buyers of July 42.5 calls with stock near 42.17. Information published by the OCC shows that open interest in that strike decreased as a result of that trading. This suggests some of the activity was related to the covering of short call positions after earnings. The stock is up slightly today to 42.26 and significant flow continues, with 73,000 contracts trading. This is twice the daily average.
In contrast to yesterday, todayís flow is put dominated. At 10:12am a multi-market sweep order was executed to buy nearly 10,000 July 35 strike puts for $.05. Another large trade took place on the AMEX in which a buyer purchased 12,600 July 37.5 puts for $.10. Similar to the calls from yesterday, these appear to be closing trades after a relatively quiet earnings release.
Vale Overseas Ltd (RIO)
A complex institutional block traded in the Brazilian iron ore company RIO on the ISE this morning. The shares are currently up $1.50 to $49.37 at midday. Shortly after 11am, 7000 August 50 puts traded at a price of $2.3884 in a trade tied to stock.
The trade was made close to mid-market. The potential motivation may be to lock in recent upside gains (the stock started the year below $30) or position for increasing volatility over the summer months.
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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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