Unusual Options Activity Review: WAG, LSI, BKS, CECO, LCC, PHM, KSS, CHS, .VIX, XRT

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Unusual Options Activity Review For Monday, June 18, 2012

Monday's Bullish Trading
Walgreens (WAG) adds 16 cents to $31.96 on a slow news day and relatively light volume of 5.5 million shares. However, options on the drug retailer were more active than usual. 34,000 calls and 6,520 puts traded on the stock Monday. July 34 calls, which are 6.4 percent out-of-the-money and expiring in 32 days, were the most actives. 8,730 traded. July 29, July 33, October 35, and October 38 calls were busy as well. It's not clear what was driving the high volume in upside calls on WAG. For whatever reason, shares are up nearly 7 percent from the 52-week lows set two weeks ago and some players in the options market seem to be anticipating additional gains in the weeks/months ahead.

Bullish trading was also seen in LSI, Barnes & Noble (BKS), and Career Education (CECO).

Monday's Bearish Trading
US Airways (LCC) rose 47 cents to $12.50 and has now skyrocketed nearly 150 percent so far in 2012. One player in the options market seems to be anticipating a pullback in the stock and Monday bought a September 8 ñ 12 put spread on LCC for $1.18, 2000X. In this spread, 2,000 Sep 12 puts were apparently bought on the airliner for $1.58 while 2,000 Sep 8 puts sold for 40 cents, creating a bearish 1X1 put spread with a max payout if the stock falls to $8 or less through the September expiration.

Bearish trading was also seen in Pulte Group (PHM), Kohl's (KSS), and Chico's FAS (CHS).

Index Recap
CBOE Volatility Index (.VIX) fell sharply Monday. The market's "fear gauge" hit a morning high of 21.98 early amid ongoing concerns about the European debt mess. The early gains didn't last and VIX had fallen below 20 through midday. The decline continued in afternoon action and, at the end of the day, the volatility index was down 2.79 to 18.32. The index is on a three-day 24.5 percent losing skid. Trading in the VIX pit was busy Monday. 304,000 calls and 418,000 puts traded on the index. The activity might continue tomorrow, as it is the last day to trade June 2012 VIX options before a settlement value is computed Wednesday morning.

Analyzing the ETF Market
SPDR Retail Trust (XRT) adds 12 cents to $58.09 and an Aug 51 ñ 57 put spread trades on the ETF for $1.40, just minutes before the closing bell Monday. In this strategy, an investor bought 15,000 August 57 puts on XRT for $1.92 and sold 15,000 August 51 puts for 42 cents. It appears to be a new position in the product and, if so a bearish view on the retailers. XRT is an exchange-traded fund that holds a basket of different companies from the retail space. A 51 -57 put spread makes its best profits if shares fall to $51 or less through the expiration. At that point, the spread widens to 6 points and the profit equals 6 minus the debit paid minus any transaction costs.



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