Unusual Options Activity Review: SWKS, DISH, CAG, MHP, CCL, WPZ, CAKE, DV, VIX, SPX, SPY, XLF, XLE
Thursday's Bullish Trading
Skyworks Solutions (SWKS) saw a volatile day of trading. Shares of the Woburn, MA semiconductor company fell in morning trading after the company updated guidance and the decline in the stock continued through the company's 2012 Analyst Day Thursday. SWKS lost $5.45 to $24.03 on heavy volume of 33.7 million shares, which is about 10X the normal activity. At the same time, options volume was 21X the daily average. 87,000 calls and 24,000 puts traded on Skyworks Thursday. Spread trading drove a lot of the activity. For example, the largest trades in SWKS involved the apparent purchase of 5,600 Jan 26 calls on the stock for $2.40 and the sale of 5,600 Jan 30 calls at $1. If bought-to-open, the spread, for $1.40, is a bullish play that targets a move to $30 or more by early-2013. 19,690 Jan 30 and 13,366 Jan 26 calls traded on SWKS Thursday.
Bullish trading was also seen in DISH Networks (DISH), Conagra (CAG), and McGraw Hills (MHP).
Thursday's Bearish Trading
Carnival Cruise (CCL) finished down 11 cents to $37.60 and has been drifting lower in the past four days after hitting new 52-week highs Friday. Some investors are possibly looking to hedge recent gains in the cruise ship operator heading into a September 25 earnings report. 6,225 puts and 1,385 calls traded on Carnival Cruise Thursday. October 36 puts, which are now 4.3 percent out-of-the-money and expiring in 29 days, saw the most flow. 2,155 traded. October 37 and 38 puts were the next most actives. Some shareholders are possibly buying Oct puts to help hedge CCL on concerns the stock might drop when earnings are reported next week.
Bearish trading was also seen in Williams Partner (WPZ), Cheesecake Factory (CAKE) and Devry (DV).
CBOE Volatility Index (.VIX) hit a morning high of 14.67, but finished up just .19 to 14.07. Although market averages fell early, they finished little changed and the S&P 500 Index (.SPX) finished down .79 to 1,460.26. Since VIX tracks the expected volatility priced into SPX options it is often influenced by the movement in the SPX – i.e. the market's real or actualized volatility. Yet, while VIX is at low levels Thursday, not every investor expects the low volatility to last. Trading in the options on the index was busy again Thursday. About 400,000 calls and 128,000 puts traded in the VIX pit. 63 percent, or 249,000 contracts, of the call volume was in the upside calls that expire in October. Oct 60 deep out-of-the-money calls were the most actives. 51,000 contracts traded.
Analyzing the ETF Market
Trading was very active across the options market and a lot of the activity was due to ex-dividend trading in a number of exchange-traded funds. A total of 10.7 million calls and 3 million puts traded on the SPDR 500 Trust (SPY), SPDR Financials (XLF), SPDR Energies (XLE) and other ETFs Thursday. Total volume across all products was about 24 million contacts, according to Trade Alert data. Trading will be probably be active again Friday due to the Quadruple Witch expiration. Not only are futures, futures options, and single stock futures expiring, it is the last day to trade September 2012 options contracts as well.
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the "Disclosure Statement for Futures and Options" prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.
View Joseph Cusick's post archive >