Unusual Options Activity Review: IMAX, DVN, DRYS, AMLN, ZNGA, LEAP, NOG, FSLR, .NDX, XOP
Unusual Options Activity Review For Tuesday, February 14, 2012
Tuesday's Bullish Trading
IMAX shares jumped $2.46 to $24.53 on heavy turnover of 3.8 million shares after the company announced a partnership with ChinasBroadway Theatre Company. IMAX gained 4 percent on the news Monday and added another 11.2 percent Tuesday. Investors were also tuning in to IMAX options Tuesday, as volume hit 13X the daily average after 17,000 calls and 765 puts traded on the stock. The biggest trades of the day were part of a spread, in which the investor sold 6,800 March 23 ñ 25 call spreads at an average of 97.5 cents. The spread likely rolls a position in March 23 calls, which are now 6.2 percent in-the-money after the stock's rally, to open a new position in out-of-the-money March 25 calls. If so, the strategist is likely closing out positions opened in mid-January, which included a buyer of 4,850 March 23 calls for 85 cents per contract on January 19. The stock is up 18.2 percent since that time and the position was apparently being liquidated for $2.13 per contract. It appears that a new bullish position was opened in March 25s maybe in anticipation of further gains in the stock.
Bullish trading was also seen in Devon Energy (DVN), Dryships (DRYS), and Amalyin Pharmaceuticals (AMLN).
Tuesday's Bearish Trading
Trading was very heavy in Zynga (ZNGA) ahead of the company's earnings report Tuesday. Shares jumped 93 cents to $14.35 on double the normal volume. 28 million ZNGA shares changed hands. The San Francisco, CA social media company released its first ever profit report as a public company after the closing bell. Players in the options market were actively jockeying for position in puts and calls on the stock ahead of the news. 119,000 puts and 89,000 calls traded in ZNGA. The top trade of the day was a February 12 ñ 13 (2X1) put ratio spread, bought for even money, 8500X. The strategist bought 8500 February 13 puts on the stock for 80 cents and sold 17000 February 12 puts at 40 cents. An investor might have initiated the spread to help hedge recent gains in shares. ZNGA has rallied 70 percent over the past month. The stock is down 4.2 percent to $13.75 in reaction to the news in extended trading Tuesday.
Bearish trading was also seen in LEAP Wireless (LEAP), Northern Oil and Gas (NOG), and First Solar (FSLR).
NASDAQ 100 Index (.NDX) touched new 52-week highs and added 5.7 points to 2575.20 Tuesday. Options on the index were a bit more active than usual. 37,000 puts and 19,000 calls traded on the index. One player bought February 2550 ñ 2525 put spreads on index for $4.50, 1000X. The spread might be a view that the index will see weakness over the next two days, as the cash settlement value for the index is computed Friday morning and the last day to trade Feb puts is Thursday. Another spread in NDX was an April 2400 ñ 2450 put spread, bought for $10.30, 1000X. Since the NASDAQ 100 is a market value weighted index of the top 100 non-financial stocks from the NASDAQ Stock Market, buying put spreads on the index is a bearish strategy on large cap NASDAQ names. Large cap tech names dominate the list. Some institutional investors were possibly active in the product today and using puts and put spreads to possibly help hedge stock portfolios.
Analyzing the ETF Market
SPDR Oil and Gas Exploration Production Fund (XOP) added 45 cents to $58.76 after crude oil gained 6 cents to $100.97 per barrel. XOP is an exchange-traded product that holds a basket of second tier energy names like Approach Resources, Williams Clayton, and Oasis Pete and tends to move higher and lower with the ebbs and flow of crude oil prices. Options volume in XOP today hit 4X the daily average, with 61,000 puts and 2,150 calls traded. Most of the put volume was due to one spread, in which the strategist bought 25,500 June 54 puts on the fund for $3.30 and sold 25,500 June 48 puts at $1.70. This June 48 ñ 54 put spread, for a $1.60 net debit, is a new position and one that offers its best payout if shares fall to $48 (-18.3%) or less through the June expiration.
This article is provided for informational purposes only. No statementin this article should be construed as a recommendation to buy or sell asecurity or to provide investment advice. The content provided has beenobtained from sources deemed reliable but is not guaranteed as toaccuracy and completeness. optionsXpress makes every effort to providetimely information to its recipients but cannot guarantee specificdelivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the "Disclosure Statement for Futures and Options" prior to investing in futures or options.
For investments using a straddle or strangle options strategy thepotential loss is unlimited. Multi-leg option strategies are subject tomultiple commissions. Profits may be eroded by the commission expendedto open and close the positions and other risks apply.
View Joseph Cusick's post archive >