Options Order Flow Summary & Unusual Activity Alert: S&P 500 "Spider" ETF (SPY) and Hansen Medical Inc (HNSN)
General Sentiment
The markets were hit hard this morning with weak retail sales and ongoing turmoil in the financial sector. The broad averages were down 1.7% at midmorning. The CBOE VIX was up more than a point to 24.21 among very strong demand for hedging protection.
S&P 500 ëSpiderí ETF (SPY)
SPY options are always among the most active in the US market as they provide a good fit for many retail and institutional portfolios. SPY options are on pace today for double their average daily volume of one million contracts.
We saw an aggressive trade on the AMEX and ISE exchanges this morning. A customer purchased 90,000 short-dated January 137 puts for prices ranging from $.71 to $.79.
These puts expire in only four days and are currently 1.25% out of the money. To recoup the buyerís total premium of nearly $7 million, the market would need to drop another 1.75% by Friday.
Some traders would view this trade as a potential sign of a bottom since hedged portfolios are less likely to be liquidated in a sell-off.
Hansen Medical Inc (HNSN)
Unusual option volume was detected in this name today. HSN traded five times the normal volume level with a focus on the March 35 calls. These calls are currently $10 out-of-the-money.
A chart of HSN volume YTD shows calls outpacing puts consistently with call open interest growing by nearly 12,000 contracts over the period shown.
The stock is lower over the period, trading from $30 down to $25, and some selling of the March 25 calls has been recorded. This suggests that at-the-money sellers may be covering their upside risk with today’s activity.
"
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.
View Henry Schwartz's post archive >
