Unusual Options Activity Review: DAL, TIF, NTAP, CHS, BKS, BC, HST, KEY, .SPX, .VIX, .DJX, XLF

Posted March 21st, 2012 by Joseph Cusick in Unusual Activity

Tuesday's Bullish Trading
Options on Delta Airlines (DAL) were actively traded Tuesday. Shares gained 22 cents to $9.53 and are on a two-day 3.5 percent run higher after losing 18.5 percent from February 3 to March 16. Some players seem to be anticipating additional gains for Delta shares, as 17,000 calls and 2,070 puts traded on the airliner. June 10 calls, which are 4.9 percent out-of-the-money, were the most actives. 5,750 traded. However, April 10, May 9, and Jun 9 calls were busy as well and implied volatility rose 4 percent to 43.5. No news on the stock Tuesday. Shares were under pressure throughout much of February and into mid-March due partly to concerns about escalating jet fuel costs. However, crude oil prices slipped $2.29 to $106.27 per barrel on Tuesday.

Bullish trading was also seen in Tiffany (TIF), NetApp (NTAP), and Chico's FAS (CHS).

Tuesday's Bearish Trading
Barnes and Noble (BKS) added 4 cents to $14.32 Tuesday, but is down 32 percent from the highs seen in June of last year. One player in the options market seems to view the potential for a move higher in the stock through the rest of 2012. The investor sold 10,000 January 20 calls on the bookseller at $1.35 and bought 10,000 January 25 calls for 70 cents. The Jan 20 ñ 25 call spread, for a 65-cent credit, seems to express the view the stock won't potentially recapture $20 by January 19, 2013. It's possibly a liquidating trade, as open interest is sufficient to cover in both contracts.

Bearish trading was also seen in Brunswick (BC), Host Hotels (HST), and Keycorp (KEY).

Index Recap
It's been relatively light trading in the index market this week. Roughly 535,000 calls and 690,000 puts traded across the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX) and other cash indexes Tuesday. One index that did notice an uptick in options volume is the Dow Jones Industrial Index (.DJX). The index tracks the performance of the Dow Jones Industrial Average divided by 100. The Dow lost 69 points Tuesday and DJX gave up .69 points to 131.70. 5,350 calls and 4,270 puts traded on the product, which is about 2.5 the daily average for DJX. Most of the flow was due to one trade, in which one investor apparently sold 3,850 Jun 130 puts on the index at $3.45 to buy 3,850 Jun 130 calls for $4.45. The bullish combo, for a $1 net debit, looks like an opening play and one that would have a risk-reward similar to actually owning the Dow Jones Industrial Average ñ until June.

Analyzing the ETF Market
July 17 calls on the SPDR Financial Fund (XLF) were the most actively traded contract on a relatively slow day of action Tuesday. More than 78,000 XLF July 17 calls changed hands. The flow included a 43,000-contract block at 32 cents when the market was 32 to 33 cents. A separate 13,000-lot traded at 35 cents when the market was 35 to 36 cents. XLF added 7 cents to $15.88 on the day. Shares are up 9.9 percent in just two weeks and have now surged more than 35 percent since late-November. Still, July 17 calls on the fund are 7.1 percent out-of-the-money. Some investors might now be selling the contract on the view that the recent rally will soon run out of steam. Shareholders with large positions in financial names might be selling upside calls on XLF as part of an overwrite strategy. SPDR Financial ETF is the exchange-traded fund that holds all of the financial-related names from the S&P 500.

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About Joseph Cusick

Joseph Cusick currently serves as the Senior Vice President of Education and a Senior Market Analyst for optionsXpress. Mr. Cusick seeks out common sense and technologically scalable educational pathways for self-directed investors of all experience levels. He is largely responsible for ramping up delivery of online and offline seminars to customers and potential clients worldwide. Prior to serving in his current role, Mr. Cusick immersed himself in the broker side of optionsXpress by managing his own book of business. Prior to joining optionsXpress, Mr. Cusick served as a market maker and portfolio manager at the Chicago Board of Options Exchange. Joseph is a graduate of Marquette University and holds his Series 4, 7 and 63 registrations with FINRA.

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