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Unusual Options Activity Review: CHK, SONS, VIX, CROX, JPM, ED and more

Bullish Flow

Chesapeake Energy (CHK), the Oklahoma City, OK independent oil and gas company, added 24 cents to $26.54 and options order flow seemed to reflect some bullishness about the company's short-term outlook, as 22,000 calls and 7,200 puts traded Wednesday. The top trades of the day surfaced in afternoon action when blocks of March 28 calls traded at the asking price of 44 cents per contract. By the end of the day, nearly 10,000 contracts had traded. March 27 and April 26 calls saw some interest as well.

Bullish trading was also seen in Crocs (CROX), JP Morgan (JPM), and PALM.

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Bearish Flow

Sonus Networks (SONS), a Westford, MA communication equipment company, added 13 cents to $2.26 and options volume jumped to 9X the average daily levels, driven by buyers of October and July 2.5 puts. October 2.5s were the most actives. 3,285 changed hands and, with 83 percent of the volume hitting at the asking price, it appears that premium buyers were initiating the trades. In addition, since existing open interest is zero contracts, the put buying seems to reflect concerns about the outlook for SONS during the months ahead.

Bearish trading also surfaced in Express Scripts (ESRX), Computer Associates (CA), and Consolidated Edison (ED).

Index Trading

Volume and volatility eased in the index market. 378,000 calls and 402,000 puts traded across the S&P 500 and the other cash indexes, which represents about 65 percent the recent average daily volume. The CBOE Volatility Index (.VIX) lost 1.10 to 20.27 and the top trades of the day surfaced around Noon when an investor bought the bullish VIX April 20 - 55 risk-reversal (bought 55 calls and sold 20 puts), 10000X. This trade is a bullish play, as it will make its best profits if VIX rallies and will suffer losses if the volatility index falls below 20.

ETF Trading

Trading was light in the ETF market as well, with about 1.9 million puts and 1.5 million calls traded across all the exchange-traded funds, which is about 74 percent the recent average daily. Some of the top trades of the day surfaced in the SPYders (SPY), which is an exchange-traded fund that holds all of the stocks of the S&P 500. SPY rose $1.01 to $110.82 and options trades included a May 114 - 104 put spread, which was bought at $3.96, 10000X. It's probably a bearish bet or an institution using a put spread to partially hedge a stock portfolio.

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