Unusual Options Activity Review: P, MUR, TLAB, OCR, LEN, PHM, MYL, AONE, LEN, .SPX, .VIX, XRT

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Unusual Options Activity Review For Monday, August 27, 2012

Monday's Bullish Trading
Pandora (P) is a name worth watching if the market remains dull this week heading into the three-day Labor Day weekend. The company is due to report earnings Wednesday afternoon and tends to see volatile reactions to the profit reports. Pandora shares were up 12.3 percent when the company last reported on May 24, but fell nearly 24 percent on March 7. Shares traded up 9 cents to $10.06 Monday and it appears that some investors were taking positions in anticipation of good news from the Internet radio operator. Roughly 25,000 calls and 1,600 puts traded on the stock. September 12 calls were the most actives and the flow included a 3300-contract block for 40 cents in the afternoon on the ISE. Data from the International Securities Exchange indicates that an investor bought the calls, to open a new position. More than 10,000 traded on the day. September 10 and 11 calls on Pandora were busy as well.

Bullish trading was also seen in Murphy Oil (MUR), Tellabs (TLAB), and Omnicare (OCR).

Monday's Bearish Trading
Lennar (LEN) was mentioned in the midday report because the homebuilder was seeing increasing put activity Monday. Pulte Group (PHM), another name in the same space, saw similar action. Shares were down 27 cents to $13.24 and options volume on the builder was 6,485 puts and 1,430 calls. October 12 puts were the most actives. 5,185 contracts traded, as buyers surfaced in afternoon action and were apparently paying between 45 to 50 cents to open new positions in these downside puts. Sep 13 puts on PHM traded 677 contracts. It's not clear what motivated the increasing put activity in LEN and PHM Monday. Shares have performed well lately (PHM up almost 110 percent year-to-date). Now some investors are possibly taking positions in downside puts to hedge the recent gains in shares of the two builders.

Bearish trading was also seen in Mylan Labs (MYL), A123 (AONE), and Lennar (LEN).

Index Recap
Monday was among the lightest options volumes days of the year. In the index market, for example, only 608,000 contracts traded, which is about half the normal activity for the index market these days. To be specific, 285,000 calls and 323,000 puts traded across the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX), and other cash products. The S&P 500 traded in a very narrow 7-point range and finished down .69 points to 1,410.44. Yet VIX, which tracks the expected volatility priced into SPX options had a good day. The volatility index was up 1.17 points to 16.35 and finished near session highs. While the market was slow and quiet, VIX is ticking higher and perhaps suggesting that we prepare for an increase in volatility in the near future. However, at 16.35, VIX is still at the lower end of the 2012 range. The five-year low of 13.3 was set a little more than a week ago.

Analyzing the ETF Market
SPDR Retail Trust (XRT) adds 4 cents to $60.73 and options volume on the ETF was 3.5X the daily average. 51,000 puts and 4,635 calls traded on the fund. More than 80 percent of the volume was due to one spread trade, in which the investor apparently bought 15,000 September 59 puts on XRT for $1.41 and sold 30,000 September 56 puts at 68 cents per contract. The 1X2 put ratio spread, for a nickel, is possibly a play on data due out later this week. Consumer Confidence is out Tuesday. Personal Spending and Income is slated for Thursday. Individual retailers will also be releasing same store sales numbers Thursday morning.


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