Unusual Options Activity Review: SHAW, KSS, MU, PMCS, FSIN, CBS, GCI, VIR, .SPX, .OEX, .VIX
Unusual Options Activity Review For Wednesday, April 4, 2012
Wednesday's Bullish Trading
Shaw Group (SHAW), a Baton Rouge, LA heavy construction company, closed down 84 cents to finish $30.04 per share and in the midst of a four-day 6.3 percent slide. The stock has now erased a 3.9 percent gain recorded on March 29 when the company reported better-than-expected earnings results. Some investors might have looked at the four-day slide in the shares as an opportunity for bullish trades on SHAW, but rather than buying shares outright today, they are apparently buying options that give the right to buy (or call) the stock at a predetermined price (strike) for a specific period of time (expiration date). 8,300 calls and only 160 puts traded on Shaw Group. May 32 calls, which are now $2 out-of-the-money and expiring in 44 days, are the most actives. 4,500 contracts changed hands. April and May 31 calls are seeing interest as well.
Bullish trading was also seen in Kohl's (KSS), Micron Technology (MU), and PMC Sierra (PMCS).
Wednesday's Bearish Trading
Fushi Copperweld (FSIN) put options were busy for a second day. As noted in yesterday's midday report, implied volatility in the options on the Beijing-based electrical equipment company has been moving higher amid increasing options volumes. The action continued today. The stock lost another 57 cents to $6.58 on high volume of 1.3 million shares. Meanwhile, 6,900 puts and 730 calls traded on the stock. April 10 puts, which are now 52 percent in-the-money and expiring in 16 days, were the most actives. 2,850 traded. April 2.5 and 5 puts on FSIN were actively traded as well. It's not clear what's been driving the action, but the stock is now down 13.1 percent in the past two days and the options order flow seems to reflect concerns about additional losses in the days ahead.
Bearish trading was also seen in CBS, Gannett (GCI), and Ventas (VTR).
Overall volumes remain light heading into the Good Friday holiday and the thin market might be affecting overall levels of volatility. 478,000 calls and 590,000 puts traded on the S&P 500 Index (.SPX), the S&P 100 Index (.OEX), and other cash indexes Wednesday; which is only about 80 percent of the recent average daily volume, according to Trade Alert data. SPX lost 14.41 points to 1,398.96 and continues to seesaw around the 1,400 level. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected volatility priced into S&P 500 options, hit an intraday high of 17.74, but gave up much of the gains and added just .76 to 16.42. Trading will likely quiet again tomorrow morning and then may slow even more later in the day, as many players hit the exits early to enjoy a three-day break.
Analyzing the ETF Market
In the midday report, we reported on July 95 ñ 100 put spreads on the iShares Long-Term Bond Fund (TLT). Later in the day, a big spread traded in the Proshares UltraShort Lehman Fund (TBT). Shares lost 53 cents to $20.40 after bonds rallied Wednesday and one investor bought 52,000 April 21 calls on the ETF for 37 cents and sold 52,000 April 23 puts at 6 cents. The spread, for a 31-cent net debit, is a bullish view on TBT. Since the fund moves 2X the inverse to TLT, buying a call spread is a bearish view on bonds. It's also a view on higher yields, because yields move higher when bond prices fall. Important Information: Inverse ETFs are designed to achieve their investment objective on a daily basis are not designed to track the underlying index or benchmark over a longer period of time. Inverse and leveraged ETFs that are reset daily are unsuitable for investors who plan to hold these products for longer than one trading session. Over longer periods of time, leveraged and inverse ETF performance can differ significantly from their daily objective due to the effects of compounding.
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