Unusual Options Activity Review: BAC, AA, CPB, TQNT, LEAP, CHKP, CYH, CECO, .VIX, QQQ
Unusual Options Activity Review For Thursday, April 12, 2012
Thursday's Bullish Trading
The largest equity options trades Thursday were in Bank of America (BAC). The stock gained 31 cents to $9.17 and was one of 26 Dow stocks to finish higher. The big options trade on the bank was a block of 125,000 June 11 calls traded on the 14-cent bid. It coincided with 62,500 June 10 calls for an average of 31.5 cents. In this position, it appears that the strategist was buying 1 Jun 10 call and selling 2 Jun 11 calls, which creates a 1X2 call ratio spread for a 3.5-cent net debit. If so, it's a bullish play on the bank with a max profit if shares move to $11 through the June expiration, which represents a 20 percent advance over the next two months. BAC is already up 64.9 percent year-to-date.
Bullish trading was also seen in Alcoa (AA), Campbell Soup (CPB), and Triquint Semiconductor (TQNT).
Thursday's Bearish Trading
A large block of puts traded on LEAP Wireless (LEAP) Thursday. Shares gained 37 cents to $8.68 and 30,000 July 8 puts traded on the stock for 86 cents per contract when the market was 82 to 86 cents. Looks like a buyer initiated the hefty premium purchase and possibly offsets a position opened three days ago, when 30,000 July 8 puts traded on LEAP. At that time, the block was apparently sold for $1 per contract. Shares are up 6.5 percent since that that time and the position is being bought to close for a 14-cent per contract profit. It's not necessarily a bearish play, but the investor might be content taking the profit only three days after initiating the put sale. They might see limited upside for LEAP going forward.
Bearish trading was also seen in Checkpoint Software (CHKP), Community Healthcare (CYH), and Career Education (CECO).
Index Recap
CBOE Volatility Index (.VIX) snapped an 8-day winning streak Wednesday and lost another 2.82 to 17.20. Trading in the options on the VIX was busy. 293,000 calls and 274,000 puts traded in the product. April 19 puts were the most actives. 44,674 changed hands. April 17 and 18 puts were the next most actives, with more than 30,000 traded in both. April options on the VIX expire next Wednesday and therefore now have just three trading days of life remaining. Some investors might have been selling to close April put positions after the two-day slide in the index. Others might be initiating new positions on the view VIX will settle at lower levels when the April options expire next week. The March settlement value for the index was just 14.55.
Analyzing the ETF Market
Powershares QQQ (QQQ) gained 76 cents to $67.20 and an interesting spread trade in the exchange-traded fund midday was a May 60 ñ 63 ñ 66 put butterfly spread traded on the ETF for 36 cents, 20000X. In this spread, the strategist sold 40,000 May 63 puts at 53 cents for the body of the fly. They also bought 20,000 May 60 puts for 23 cents and 20,000 May 66 puts for $1.19 for the wings. The spread is a bearish play on the NASDAQ 100, as it makes its best profits if shares fall to $63 or less through the May expiration, which represents a 6.3 percent decline over the next 36 days. It traded later in afternoon action for 25 cents, another 20000X.
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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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