Options Flow Summary: VIX, AA & DIS
CBOE Volatility Index (VIX)
This has been a very volatile morning with swings exceeding 1% in the broad market averages. Currently, the market is flat and options volume is in-line with recent averages. This see-saw action combined with volatile trading in oil and the continued credit debacle has helped to lift the CBOE VIX index to 23.64. This is a major shift from the mid-teen levels that have persisted for most of the year.
Nearly 40,000 VIX August 25 calls were purchased this morning. The buyers at these elevated levels appear to be aggressively protecting short volatility portfolios from additional losses.
Alcoa Inc (AA)
A large trade took place in AA just after 11am this morning on the ISE. A buyer paid $.20 for 35,000 August 47.5 calls in what appears to be a closing transaction. The stock is currently trading near $37.28.
The July options flow for AA involved repeat sellers at levels ranging from $0.50 to $1.50. Takeover speculation helped the stock touch highs exceeding $48.00.
Earnings are due after the close today. The options flow over the past two weeks shows a significant accumulation of August 35 calls. Since July 18th, close to 25,000 August 35 calls have traded at levels ranging from $1 to current prices of $.30.
Open interest stands at 24,772 contracts with the stock currently at $33.45. The buyers of these calls are looking for a positive surprise that will drive the stock back to the $36 level. This was last seen during the earnings release on May 8th.
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