Unusual Options Activity Review: WFR, ZION, GILD, WSM, MCO, JPM, FDX, ALTR, .VIX, GLD
Unusual Options Activity Review For Wednesday, April 11, 2012
Wednesday's Bullish Trading
MEMC (WFR) has lost more than 73 percent over the past twelve months. The company makes silicon wafers and has heavy exposure to the solar power industry. However, shares were up 40 cents to $3.74 Wednesday on heavy volume of nearly 16 million shares amid strength in the sector (SATC, STP, FSLR also traded higher). Meanwhile, options volume in MEMC was 2.5X the daily average after 3,900 calls and 1,160 puts traded on the stock. May 4 calls, which are now 7 percent out-of-the-money and expiring in 37 days, were the most actives. 1,228 traded. Some investors in the options market might have a bullish view on MEMC, but rather than buying the stock outright Wednesday, they might have been purchasing these calls that give the right to buy (or call) the stock for a specific strike price (4) through the expiration (May 19, 2012).
Bullish trading was also seen in Zion Bancorp (ZION), Gilead Sciences (GILD), and Williams Sonoma (WSM).
Wednesday's Bearish Trading
Moody's (MCO) shares jumped $1.08 to $41.85 and options volume on the credit rating agency was 7X the daily average. 4,600 puts and 700 calls traded on the stock Wednesday. Most of the volume was due to one spread trade, in which the strategist bought 2,000 March 40 puts on the stock for 96 cents and sold 2,000 March 37 puts at 38 cents. The May 37 ñ 40 put spread looks like a new position for a 58-cent debit. If so, it's a bearish play with a max payout if MCO falls to $37 (-11.6%) or less through the May expiration (34 days). Shares had a four-day 5.1 percent drop prior to Wednesday. Earnings will be reported on April 26.
Bearish trading was also seen in JP Morgan (JPM), FedEx (FDX), and Altera (ALTR).
Index Recap
CBOE Volatility Index (.VIX) snapped a winning streak. After gaining 32.1 percent over the past eight days, the index, which tracks the expected volatility priced into S&P 500 options, gave back .37 to 20.02 and settled very near the 20 "psyche" level. Trading was busy in the VIX pit Wednesday, as 338,000 calls and 230,000 puts traded on the product. The top trades of the day were interesting, as one investor bought 67,000 May 26 calls on the VIX and sold 67,000 May 37.5 calls. $1.25 was paid for this hefty May 26 ñ 37.5 call spread and it appears to be a new position. If so, it's targeting additional potential gains for VIX, as the spread will breakeven (excluding transaction costs), if the index settles at 27.25 at the May expiration, which is in 34 days.
Analyzing the ETF Market
SPDR Gold Trust (GLD) saw heavy volume despite little movement in the yellow metal Wednesday. Gold lost $1.50 to $1659 an ounce and GLD, which is a fund that owns the physical commodity stored in bank vaults, edged down 4 cents to $161.06. The top trade in the product was a 60,000-contract block of September 225 calls at 38 cents per contract. It appears to be a closing trade and offsetting a position from January 5, when 60,000 of the same contract were bought for $1.45 per contract to open. Shares are up 2.5 percent since then, but time decay has taken a toll on these deep out-of-the-money calls. May 170, May 185, and March 190 calls saw large blocks traded Wednesday as well. The investor might have rolled out of the September 225 call options to new positions in calls at different expiration dates and lower strikes. Total volume in the GLD was 238,000 calls and 51,000 puts.
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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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