Unusual Options Activity Review: WMT, TIVO, STEC, ATPG, ARMH, SANM, ELX, SYY, .VIX, XLB
Unusual Options Activity Review For Monday, April 23, 2012
Monday's Bullish Trading
Walmart (WMT) tumbled 4.7 percent to $59.54 on heavy volume of 37.5 million shares and was the biggest loser in the Dow Jones Industrial Average Monday amid allegations the company engaged in bribery in Mexico for years and then covered up the scandal. If the allegations are true, it could potentially tarnish the image of the world's largest retailer. Shares tumbled on the reports and options volume was brisk, as 73,000 calls and 46,000 puts traded in Walmart. The top trades were blocks of January 2013 and January 2014 $40 calls, which are almost $20 in-the-money. Some investors might have been liquidating winning positions in longer-term ITM calls on the news. However, not all of the flow was bearish. May 60 calls, which are .8 percent out-of-the-money and expiring in 25 days, were the most actives. 14,500 traded. May 62.5 and Weekly 60 calls were the next most actives, as some investors might have been taking positions in short-term upside calls on the view that Monday's sell-off in WMT was potentially overdone.
Bullish trading was also seen in TIVO, STEC, and ATP Oil and Gas (ATPG).
Monday's Bearish Trading
ARM Holdings (ARMH) is potentially a name worth watching Tuesday morning. The company will release earnings and a large spread traded in the British semiconductor company ahead of the news. Shares lost 28 cents to $27.58 and lost 4.9 percent over three days. In options action, one investor sold 8,150 June 31 calls on the stock at 25 cents per contract to buy a Jun 24 ñ 27 put spreads for $1. The three-way, for a 75-cent debit, traded multiple times on the day and appears to be new positioning in ARMH. If so, the spread seems to express a bearish view on the stock, as the position offers its best payoff if the stock falls to $24 or less through the expiration, which represents a 13 percent drop over the next 53 days.
Bearish trading was also seen in Sanmina (SANM), Emulex (ELX), and Sysco (SYY).
CBOE Volatility Index (.VIX) recaptured the 20 "psyche" level, but then closed near session lows Monday. Still, the market's "fear gauge" gained 1.53 to 18.97 after the S&P 500 lost 11.59 points to 1,366.94. Interestingly, volume in the VIX pit was very light Monday despite the volatility in the index. Only 129,000 calls and 62,000 puts traded on the volatility index, which is 40 percent the recent daily average for the product, according Trade Alert data. May 25 calls were the most actives. 18,878 contracts changed hands. July and May 15 puts were the next most actives.
Analyzing the ETF Market
Put volume picked up in the SPDR Basic Materials Fund (XLB) Monday morning. XLB lost 45 cents to $36.03 on volume of 10.3 million shares. Meanwhile, 47,000 puts and 11,000 calls traded on the ETF. June 34 puts, which are 5.6 percent out-of-the-money and expiring in 53 days, saw most of the flow. The activity included a morning buyer of 11,050 contracts for 76 cents per contract and then, a bit later, another 10,560 were bought for 87 cents. Total volume in XLB Jun 34 puts Monday was 39,292 contracts. XLB is one of nine Select Sector Exchange Traded Funds that collectively hold the 500 stocks from the S&P 500. XLB holds all of the chemical, metal and other material-related companies. Some investors might have been possibly buying downside puts on the fund to hedge the risk of further losses in the sector through mid-June.
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