Unusual Options Activity Review - REE, MCP, AVL, REMX, YHOO, TYC, PCS,JACK, THC, CYH, CVC, SLV,
Unusual Options Activity Review For Monday, April 11, 2011
Bullish Flow
Rare Element (REE) is rallying and calls were actively traded Monday. Shares finished the day up 70 cents to $15.12 and options volume was 2.5X the average daily. 26,000 calls and 5,200 puts traded in the name. April 15 calls, which expire at the end of the week and are now 12 cents in-the-money, were the most actives. 5,480 traded. Short-term players were focused on the April 14 and 16 call options as well. The sector was strong Monday, with Molycorp (MCP) and Avalon Rare Metals (AVL) also posting solid gains. The Market Vectors Rare Earth ETF (REMX) gained 2.3 percent on the day. Investors are focused the group after JP Morgan raised their ratings on Molycorp Monday.
Bullish trading was also seen in Yahoo (YHOO), Tyco (TYC), and MetroPCS (PCS).
Bearish Flow
Jack In the Box (JACK) shares fell and options were actively traded after Credit Suisse analysts cut the stock to underperform. JACK lost $1.05 to $21.12 and options volume included 1,380 calls/1500 puts. Typical volume is about 150 contracts. May 22.5 calls were the most actives. The top trade was a 225-lot at the 50-cent asking price. 1,000 traded total. Beyond that, however, most of the action was somewhat defensive. May and June 20 puts, which are $1.12 out-of-the-money were the most actives. Attention next turns to the company's earnings, which are due around May 12.
Bearish flow also surfaced in Tenet Healthcare (THC), Community Healthcare (CYH), and CVC.
Index Trading
The CBOE Volatility Index (.VIX) strayed from its normal pattern. While the S&P 500 (SPX) lost 3.7 points, VIX gave up 1.31 to 16.56. The volatility index normally moves higher when the S&P 500 heads south. Monday, however, VIX sank and closed at its lowest levels since February 18. The decline in the volatility index might be related to events late-Friday after the US government averted a shutdown of non-essential operations. There had been some concern about the economic implications from a shutdown and, after an agreement was reached, some of the fear and anxiety probably eased. Consequently, VIX, which is sometimes called the "fear gauge" dipped Monday after the event risk had passed.
ETF Trading
An unusual trade surfaced in the iShares Silver Fund (SLV) Monday morning. Shares touched a new 52-week high early, but then lost 65 cents to $39.21. May Silver approached $42 early, but then reversed direction and lost 44 cents to $40.17. Meanwhile, a noteworthy trade in SLV, which is an exchange-traded fund that holds the metal, is a buyer of 100,000 July 25 puts at 10 cents each. It's very unusual because the calls are so deep out-of-the-money. A move to $25 represents a 37.8 percent plunge in the SLV fund. Overall volume was very heavy. 316,000 calls and 382,000 puts traded on the Silver Fund.
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