Unusual Options Activity Review (HIG, CIT, DIS, EGLE, ANR, KOL, MEE, ACI, FCL, DDS, MCHP, VIX)
Stocks were broadly higher late Wednesday, with banks and Disney (DIS) shares leading the Dow Jones Industrial Average to an 80-pint gain. Stocks opened the session on solid footing after the latest jobs data from ADP showed the economy losing 491,000 jobs in April; which was bad, but not as grim as the 645,000 job loss economists feared.
Meanwhile, BofA (BAC) gained more than 15 percent to $12.50 per share on reports the bank will be required to raise $35 billion in capital, but it is expected to come from common equity rather than outside its existing capital base. The Select Sector Financials (XLF) was up .79 to $12.35.
Disney (DIS) was also helping the Dow. Shares were up 11.8 percent late in the day after the company reported earnings that beat Street estimates. Meanwhile, the NASDAQ was lagging, up just 3.5 points, ahead of earnings from Cisco Systems (CSCO) due out after the closing bell.
Crude oil finished at six month highs and gold gained $7.10 to $911.40 an ounce. In the options market, trading was active, with approximately 10.1 million calls and 7.2 million puts traded across the exchanges by late session.
Unusual Options Activity
- Hartford (HIG) options volume was running 2X the usual, with 119,000 contracts traded and call volume representing 71 percent of the volume.
- Options activity in CIT Group (CIT) rose to 5X the usual, with 74,000 contracts traded and call volume representing 53 percent of the action.
- Disney (DIS) options activity was running 4X the usual. 56,000 contracts traded and call volume accounting for about half the volume.
- Eagle Bulk Shipping (EGLE) was up 74 cents to $9.07 and calls actively traded ahead of earnings that were due out after the closing bell. 7,900 contracts traded, compared to 900 puts. May 10 calls were the most active, with 3,940 and some players might be buying premium - perhaps because Dryships (DRYS) has been ripping higher ever since reporting better-than-expected earnings Friday.
- Coal stocks were hot after Alpha Natural Resources (ANR) reported strong earnings. The Market Vectors Coal Fund (KOL) was up $1.24 to $22.33 and up 36.9 percent from a week ago. ANR was up $5 to $30.32 and 31K calls traded, compared to 5,800 puts. Players were also looking for additional upside in Massey (MEE) calls (11,000 traded, compared to 4000 puts), Arch Coal (ACI) calls (23K traded, compared to 5,340 puts), and Foundation Coal (FCL) calls (with 4,180 traded, compared to 570 puts.)
- Dillard's (DDS) was down 6 cents to $8.36 and May 7.5 puts were active Wednesday. 3,300 contracts traded and all of that volume hit ask-side. In addition, since existing open interest was 984 contracts, it appeared that some investors might be buying-to-open puts on the retailer, perhaps in anticipation of weak monthly sales numbers expected Thursday.
- Microchip (MCHP) puts were active for a second day heading into a May 7 (after market) earnings release. Open interest in MCHP puts increased by 17K following a day of active trading, with May and June 25 puts leading the flow. The same two contracts were active Wednesday, as it appeared the spread was bought (bought June, sold May) more than 9000X Wednesday - possibly rolling out a bearish position from May to June.
- The CBOE Volatility Index (.VIX) was down for the sixth time in seven days and falling to seven-month lows. VIX was down .42 to 32.94 after the Dow spent most of the past two days in a tight range. The industrial average traded in a 95-point range Tuesday and was in a 101-point range Wednesday. The lack of movement in the major averages was putting pressure on VIX, which was at its lowest levels since late September. VIX measures the expected volatility priced into S&P 500 Index options.
- Wells Fargo (WFC)
- Disney (DIS)
- Garmin (GRMN)
- General Motors (GM)
- Intel (INTC)
- SPDR Homebuilders Trust (XHB)
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