Unusual Options Activity Review: NFLX, STEC, STX, WDC, MU, CIE, BAX, SLM, .VIX, FXE
Unusual Options Activity Review For Monday, April 16, 2012
Monday's Bullish Trading
Netflix (NFLX) lost $3.02 to $101.15 on relatively light volume of 3.8 million shares. Typical volume is about 4.8 million. Meanwhile, options action was interesting, as 52,000 calls and 24,000 puts traded on the stock. Much of the call activity was due to spread trading. In afternoon action, 9,000 May 115 calls traded on the stock for $4.05 and 9,000 May 130 calls at $1.45. The May 115 ñ 130 call spread, for a $2.60 net debit, appears to potentially be a new position. The same spread also traded another 5,000X for $2.70. The position, which was apparently bought to open a new position, is a bullish play that makes its best profits if NFLX rallies to $130, or 28.5 percent, through the May expiration (32 days). That's a rather large move. And the spread might be a play on earnings. Shares jumped 22 percent on 1/26 when Netflix last reported earnings. The company is due to report again on April 23.
Bullish trading was also seen in STEC, Seagate Technology (STX) and Western Digital (WDC).
Monday's Bearish Trading
A large trade surfaced in Micron Technology (MU) Monday. Shares of the chipmaker added 15 cents to $7.12 on the day, but are down 19.4 percent during the past month. One investor might be possibly looking to hedge a big stock position as 25,000 January 2014 $10 puts were bought on Micron Monday. The investor paid $4 per contract on the International Securities Exchange and was opening a new position. The premium purchase, totaling $10 million, is somewhat unusual because the puts are already $2.88 in-the-money. So, an investor is possibly using the puts to hedge a long stock position on concerns the recent decline in shares may continue in the weeks/months/years ahead.
Bearish trading was also seen in Cobalt (CIE), Baxter (BAX), and SLM.
Trading in the options market remained defensive. Stock market averages last week suffered their biggest weekly losses so far in 2012 and the cautious underlying tone carried over to trading Monday. 6.8 million calls and 7.3 million puts traded across the nine options exchanges, according to preliminary numbers from WhatsTrading.com Premium. That, in turn, yields a put-to-call ratio of 1.07 and the highest levels of the year. This put-to-call ratio is perhaps sign that investor sentiment is becoming more bearish. However, other indicators didn't point to high levels of negativity today. The S&P 500 Index lost just .69 points to 1,269.27 and CBOE Volatility Index (.VIX) hit a morning high of 20.42, but finished flat at 19.55.
Analyzing the ETF Market
CurrencyShares Euro Trust (FXE) added 59 cents to $130.74 and options volume in the product was 2.5X the daily average, with 18,000 puts and 2,600 calls traded on the ETF Monday. June 130 puts, which are now .6 percent out-of-the-money, were the most actives. 9,375 traded. June 125 and 120 puts saw interest as well. FXE is an exchange-traded fund designed to track the EUR/USD currency pair X 100. The euro edged up .5 percent to 1.314 against the dollar, but the recent trend has been in the other direction. FXE is down 1.5 percent month-to-date and Monday's interest in June puts on the fund probably expresses a bearish view on the European currency through the June expiration, which is in 60 days.
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 >