Unusual Options Activity Review: PFE, ACF, DISH, CSCO, PCX, VMED, FOSL, TPX, .VIX, .SPX, OIH
Unusual Options Activity Review For Monday, May 7, 2012
Monday's Bullish Trading
Pfizer (PFE) added 7 cents to $22.45 and was one of 12 Dow stocks to finish higher Monday. Seventeen Dow stocks suffered losses and one was unchanged on a day of mixed trading on Wall Street. Options on Pfizer were actively traded. Roughly 44,000 calls and 22,000 puts traded on the drug-maker Monday. The largest trade (by number of contracts) was a 5,400-contract block of July 23 calls traded for 36 cents per contract. Sources tell us the block of calls was bought to open a new position. At the end of the day, 14,670 July 23 calls traded on Pfizer. The stock touched a 52-week high of $23.3 on Friday before suffering a 5-day 3.9 percent losing skid last week. Monday's July 23 call buyers are possibly looking for the stock to revisit those highs before mid-July. The company faces some event risk this week. An FDA committee is reviewing the company's rheumatoid arthritis drug Wednesday.
Bullish trading was also seen in Abercrombie (ACF), DISH Networks (DISH), and Cisco (CSCO).
Monday's Bearish Trading
Options on Patriot Coal (PCX) were busy Monday ahead of earnings. The company is due to report Tuesday morning. Shares touched new 52-week lows of $5.09 Monday morning before rebounding and closing up a nickel to $5.38. Still, the stock has been decimated over the past twelve months and is almost 80 percent below the levels seen a year ago. Some players in the options market appear to be bracing for further losses in shares of the coal producer. 45,000 puts and 4,120 calls traded on the stock. The largest trades of the day are part of a spread, in which the investor sold 12,000 May 6 puts on PCX for 89 cents and bought 12,000 June 5 puts for 49 cents. The spread, for a 40-cent credit, probably rolls a position out one month and down one strike price after the ongoing slide in shares. The investor might have correctly anticipated the weakness and is now selling in-the-money May puts to buy out-of-the-money June put options.
Bearish trading was also seen in Virgin Media (VMED), Fossil (FOSL), and Tempur Pedic (TPX).
Index Recap
CBOE Volatility Index (.VIX) saw a seesaw trading session. VIX opened higher and rose to 19.87 before drifting lower into midday and then falling to 18.59 in afternoon action. VIX then ticked higher and finished the day down .22 to 18.94. VIX, which is sometimes called the market's "fear gauge" because it moves higher during times of panic and mayhem on Wall Street, doesn't reflect much fear in the market these days. In fact, volumes have been light. 505,000 calls and 471,000 puts traded on the VIX, S&P 500 Index (.SPX) and other cash indexes Monday, which is only about 79 percent of the average daily volume during the past month, according to Trade Alert data. So while the media might have been fixated on events in Europe, the so-called "smart money" players in the index pits seem somewhat unimpressed.
Analyzing the ETF Market
Oil Service HOLDRS (OIH) have been under pressure and put volume is picking up in the fund. OIH is an exchange-traded fund that represents ownership in a basket of leading oil drilling names. A unique feature about the HOLDRS is that the ETF can be converted into the shares of the individual companies that comprise the fund. However, that doesn't affect how the options on the product trade. Shares slipped 4 cents to $38.58 Monday after a 6.3 percent slide Wednesday through Friday. Players in the options market seem to be taking notice of the weakness in the sector. 12,000 puts and 2,830 calls traded in OIH, which is more than double the daily average. May 38, 39 and 40 puts were the most actives in the product.
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