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Unusual Options Activity Review - MMR, RX, SIGM, CY, GDP, ED, WLL, DDS, VIX, KBW

Bullish Flow

McMoran Exploration (MMR), a New Orleans-based oil and gas company, fell 38 cents to $7.53 after falling crude oil prices sent most names in the energy sector lower Thursday. Crude lost 3 percent to settle at $76.91 a barrel. In MMR, it seemed that some investors were taking bullish positions, even as shares slipped. 6,200 MMR calls and only 475 puts traded on the day. January 10 calls at the $10 strike were the most actives. 4280 traded and, with 83 percent hitting ask-side, it looks like call buyers were dominating the day's trades in McMoran.

Bullish trading also surfaced in IMS Health (RX), Sigma Designs (SIGM), and Cypress Semi (CY).


Bearish Flow

Goodrich Petroleum Corp. (GDP), a Houston, TX oil and gas company lost $1.49 to $23.34 and options volume hit 7X the average daily. Most of the activity was on the put side of the options chain. 4564 contracts traded hands and, of that volume, 67% hit ask-side of the bid-ask spread, according to data from web site, WhatsTrading.com. Traders were focused on November and January puts, apparently opening new positions in anticipation of further losses on GDP.

Bearish activity also picked up in Consolidated Edison (ED), Whiting Petroleum (WLL), and Dillard's (DDS).

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Index Trading

Trading activity picked up a bit in the index pits after volatility rose a notch Thursday. 722,000 puts and 548,000 calls traded across all the indexes. Two of the top trades hit the CBOE Volatility Index (.VIX) in afternoon action when an investor bought the November 25 straddle (puts and calls) at an average of $2.175 per contract, 23000X. It's a bold trade because VIX options expire next Wednesday and if VIX (futures) settle at $25 the strategist risks losing the entire premium (because both puts and calls at the 25 line will expire worthless). It's a bet on a big move in the VIX, which finished the day up 1.20 to 24.24.


ETF Trading   

A large block of puts traded on the SPDR KBW Bank Fund (KBW) Thursday. Shares finished the day down 50 cents to $21.46 and 10000 March 19 puts traded at $1.10 per contract. While this appears to be a large premium buyer, it might be tied to a block of 1 million KBE shares that traded at $21.48. If so, this is possibly a protective put strategy (buy puts and shares), which has the same risk graph as simply buying call options.

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