Unusual Options Activity Review: LYB, HUN, DOW, CE, OSG, WLK, TEX, DV, VIX, SPX, SMH

Tuesday's Bullish Trading
A number of chemicals companies saw interest Tuesday. LyndellBasell Industries (LYB), for example, was up $2.94 to $54.36 in active trading of 9.2 million shares, which is almost 3X the normal for LYB. On the options front, volume was 41X the daily average. 150,000 calls and 14,000 puts traded on the Dutch chemicals maker. Spread trading drove a lot of the volume. The largest surfaced in midday action when the stock was trading for $53.86. An investor bought 35,000 November 57.5 calls on LYB for 90 cents and sold 35,000 November 60 calls at 30 cents. The Nov 57.5 – 60 call spread, for 60 cents, seems to be a rather aggressive play targeting a move to $60 or higher through the November expiration, which represents a 10.4 percent jump in just 31 days.

Bullish trading was also seen in Huntsman (HUN), Dow Chemical (DOW), and Celanese (CE).

Tuesday's Bearish Trading
Overseas Shipholding (OSG) saw high put volume for a second time in three days. As noted in Friday's closing report, January 4 puts on the shipping company saw a flurry of activity late last week. Shares were trading for $5.08 at the time. The stock came under pressure Tuesday and lost $1.41 to $3.76 on increasing volume of more than 2 million shares. The volatility was apparently sparked by concerns about the company's short-term borrowing needs. For whatever reason, OSG was under pressure Tuesday and options volume jumped to 9X the daily average. About 20,000 calls and 8,100 puts traded in the name. October and January 3 puts were the most actives.

Bearish trading was also seen in Westlake Chemical (WLK), Terex (TEX), and Devry (DV).

Index Recap
CBOE Volatility Index (.VIX) slipped .05 to 15.22 after the S&P 500 Index (.SPX) gained another 14.79 points to 1,454.92. Trading in the VIX pit was active, due in part to the expiration. Since the settlement value for October options on the volatility index is Wednesday, the last day to trade the contract was Tuesday. 372,000 calls and 237,000 puts traded on the index. Of that, 35 percent – or 212,000 contracts – were October options. Yet, there are still nearly 3.5 million contracts of open interest in the October options on VIX. 2.51 million contracts are call options and about 2.46 million of those are out-of-the-money if VIX stays below 16. Since the calls are often used to hedge the risk of higher volatility, a lot often expire worthless if there isn't a substantial increase in volatility heading into the expiration.

Analyzing the ETF Market
Semiconductor HOLDRS (SMH) gained 66 cents to $31.50 and players in the options market showed interest in October call options on the ETF Tuesday. October 31 calls were the most actives. 2,935 contracts changed hands against 1,613 in open interest. Another 2,295 October 32 calls traded against 1,083 in open interest. Total volume was 6,220 calls and 210 puts, which is 4X the daily average for the product. SMH is an exchange-traded fund that holds shares of leading semiconductor and semiconductor capital equipment companies. Players were showing interest in short-term options on the fund ahead of Intel's earnings. The world's largest chipmaker reported earnings after the closing bell and shares are down 30 cents, or 1.3 percent, on the heels of the results. October ETF and equity options expire at the end of this week.

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