Options Flow Summary: VIX, EP & BSC
CBOE Volatility Index (VIX)
The VIX continues to trade near multi-year highs. It peaked above 26.4 at 11am this morning when the market was on its lows. The options flow in this sentiment indicator shows that some sophisticated participants are willing to sell into current implied levels. The current flow is dominated by sellers of August 25 and 30 calls.
With more than 215,000 contracts of open interest in the August 25 calls, long position holders may be trying to monetize some of their recent gains.
El Paso Corp (EP)
The largest trade in the market today is the EP September 16-17 put spread. It was sold on the NYSE-Arca exchange 32,500 times this morning for a $.55 credit. This trade went up ahead of EP's earnings, which are scheduled be released tomorrow morning.
Examination of prior trading in EP suggests that the seller is rolling a long position that was accumulated over the past week. He appears to be taking some money off the table while maintaining a significant downside profile.
Bear Stearns Companies Inc (BSC)
The stock is below $105 and trading very actively today. The options flow involves volatility sellers who may view the high level changes at the firm as a positive sign despite the stock performance.
Over the past two weeks, the stock has plummeted from $130 to $105. Most of the options activity involved buyers of puts. During that period, the implied volatility of 105 strike options has gone from the 50% range to current levels near 70%. Todayís flow appears to involve selective premium sellers, with August 100 and 105 puts seeing repeated sales.
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