Unusual Options Activity Review: INTC, JBLU, CIGX, STLD, RIMM, AMD, SNV, SLAB, .SPX, .VIX, XLF
Unusual Options Activity Review For Thursday, May 25, 2012
Thursday's Bullish Trading
Intel (INTC) added 21 cents to $25.65 and was one of 21 Dow stocks to finish with gains Thursday. However, shares have fallen roughly 11 percent since hitting 52-week highs of more than $29 on May 2. One player in the options market seems to be anticipating another leg higher in the chipmaker and, in morning action, sold 7,000 October 22 puts on Intel at 68 cents to buy 7,000 October 28 calls for 70 cents. This Oct 22 ñ 28 bullish "risk-reversal" traded on the ISE (10,000 total) and data confirm that puts were sold to buy calls. If so, it's a bullish view and the investor is probably a willing buyer of the stock at $22 through mid-October. Therefore, they are writing $22 puts, but they're also also buying $28 calls to get upside exposure in the stock.
Bullish trading was also seen in Jet Blue (JBLU), Star Scientific (CIGX), and Steel Dynamics (STLD).
Thursday's Bearish Trading
Research In Motion's (RIMM) woes continue. Shares of the Blackberry-maker touched new 8-year lows and finished down 38 cents to $10.71 after Reuters reported that the company's head of global sales is leaving the company. RIMM has now lost three-quarters of its market value in the past 12 months. Some investors seem concerned that the trend will continue, as 62,000 puts and 45,000 calls traded on the stock Thursday. July 10 puts, which are now 6.6 percent out-of-the-money and expiring in 57 days, were the most actives. 21,265 traded and, with 84 percent of the volume trading at the offer, put buyers were apparently taking positions on concerns RIMM might slide to less than $10 in the weeks ahead.
Bearish trading was also seen in Advanced Micro (AMD), Synovus Financial (SNV), and Silicon Labs (SLAB).
Index Recap
Trading slowed Thursday and barring any major news items Friday, is likely to remain slow heading into the three-day Memorial Day weekend. The S&P 500 Index (.SPX) saw whippy intraday action, but at the end of the day, was up just 1.82 points to 1320.68. CBOE Volatility Index (.VIX), which tracks the implied volatility priced into SPX options, also saw choppy action and hit an intraday high of 23.22, but lost .79 to 21.54 on the day. While volumes were relatively light across the options market, trading in the VIX pit was active. 453,000 calls and 262,000 puts traded on the index. June 20 puts saw the most volume. 57,476 contracts traded. July 40, 32.5, and 47.5 calls were the next most actives. The actual or realized volatility of the S&P 500 over the past thirty days is only 12 percent. Some players might be buying Jun 20 puts on VIX on the view it is too high relative to realized volatility. Others might be buying July calls on the view that both realized and implied volatility could see another spike heading into the sometimes volatile summer months.
Analyzing the ETF Market
SPDR Financials (XLF) continues to see high put volume. Options volume in the ETF Wednesday was 85,000 calls and 281,000 puts. The action was even more lopsided Thursday. 447,000 puts and 57,000 calls traded on XLF, a ratio of almost eight-to-one. Large blocks of August 13 puts, totaling 186,830 contracts, changed hands Thursday. July 11, 13, and 9 puts were the next most actives in XLF and included some put butterfly spreads, in which July 11 puts were being sold for the body of the spread while 9 and 13 puts bought for the wings. If bought, this type of fly is a directional play targeting the middle strike of the spread ($11) through the expiration (57 days). Shares of the fund added a penny to $14.07 on the day, but have lost almost 9 percent month-to-date. (SNV), and Silicon Labs (SLAB).
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About Joseph Cusick
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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