Unusual Options Activity Review: PFE, MS, P, RENN, KSS, JWN, SPX, EUO
Unusual Options Activity Review For Tuesday, May 15, 2012
Tuesday's Bullish Trading
Pfizer (PFE) was off 28 cents to $22.30 and one of 24 Dow stocks to finish with losses Tuesday. Options action on the pharmaceutical maker was interesting, as 94,000 calls and 24,000 puts traded in PFE options. The top trades were part of a spread, in which the investor sold 15,000 June 23 calls on the stock at 22 cents and bought 15,000 September 23 calls for 68 cents. This Jun ñ Sep 23 call calendar spread, for a 46-cent debit, traded 25000X on the day and data from the options exchange indicate that both legs of the spread were opening trades. If so, the strategist possibly has a bullish view on the stock through September and is buying upside $23 calls, but they donít expect the stock to move beyond that 23 level (+3.1 percent) through the June expiration (31 days). The stock recorded a 52-week high of $23.3 on April 27 and has seen whippy action since that time. Earnings were last reported on May 1.
Bullish trading was also seen in Morgan Stanley (MS), Pandora Media (P), and Renren (RENN).
Tuesday's Bearish Trading
Kohlís (KSS) shares lost 36 cents to $46.90 and extended a losing streak to four days and almost 8 percent. Options on the retailer were actively traded and seemed to reflect concerns about additional losses. 13,000 puts and 2,190 calls traded on Kohlís Tuesday. May 46 puts, which are 1.9 percent out-of-the-money and expiring at the end of the week, were the most actives. 6,350 traded and, with 80 percent of the trading activity hitting at the offer, it appears that buyers were initiating the trades. May 47 and October 44 puts were also busy. The bearish trading in Kohlís surfaced today ahead of earnings from peer JC Penney (JCP), which is down 14 percent in extended hours trading on disappointing results. Another name in the space, Target (TGT), reports tomorrow morning.
Bearish trading was also seen in Joy Global (JOY), Nordstrom (JWN), and Loweís (LOW).
Trading was busy in the S&P 500 Index (SPX) pit for a second day. 700,000 puts and 268,000 calls traded on the S&P 500 yesterday, which was the third highest put volume day for the product so far in 2012. The action continued today. The S&P 500 lost 7.69 points to 1,330.66 and options volume was 645,000 puts and 280,000 calls. Some players are likely closing out positions ahead of the May expiration. Others are likely opening new positions to hedge stock portfolios from the risk of further losses. June 1275 puts and May 1300 puts were the most active S&P 500 index options. Meanwhile, CBOE Volatility Index (VIX), which tracks the expected volatility priced into S&P 500 options, ticked up .10 to 21.97 to record its highest close since mid-January.
Analyzing the ETF Market
Options action is picking up in the ProShares UltraShort Euro Fund (EUO). The fund, which is a leveraged play on the (inverse) of the EUR/USD currency pair, gained 35 cents to $20.78 on heavy volume of 4.2 million shares. EUO has surged 8.2 percent so far in May and is at its highest levels since mid-Jan. Some players in the options market seem to be anticipating additional euro weakness, as 11,000 calls and 860 puts traded on EUO today. May 20 and 21 calls were the most actives. Since EUO moves inverse to the EUR/USD currency pair, buying calls on the fund represents a bearish bet on the European currency. Important Information: Inverse ETFs are designed to achieve their investment objective on a daily basis are not designed to track the underlying index or benchmark over a longer period of time. Inverse and leveraged ETFs that are reset daily are unsuitable for investors who plan to hold these products for longer than one trading session. Over longer periods of time, leveraged and inverse ETF performance can differ significantly from their daily objective due to the effects of compounding.
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