Unusual Options Activity Review (VLO, XLI, DDUP, GILD, HGSI, CELG, OSIP, WAG, EEM, GE)

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Sentiment
Stocks were trading broadly lower on weak economic data and falling commodity prices late-Wednesday. The table was set for early weakness after data released from ADP before the opening bell showed the economy losing 532K private sector jobs in May. Economists were looking for a loss of 525K. April numbers were revised down to -545K, from the initial -491K.

Then, thirty minutes into the trading session, a report on Factory Orders and the ISM Services Index also fell short of economist estimates. Factory Orders rose .7 percent in April, which follows a 1.9 percent drop in March and compares to expectations of +.9 percent. Meanwhile, the ISM Services Index, a gauge of economic activity outside of the manufacturing sector, rose to 44 from 43.7. Economists were looking for an increase to 45.

While the Dow slipped to session lows on the heels of the data, crude oil came under pressure on bearish weekly inventory data. Crude was down $2.40 to $66.15 a barrel. Gold sank more than $20 and falling commodities was weighing on shares of energy, agricultural, mining, and metals companies.

In the end, investors found few reasons to bid stock prices higher ahead of productivity and weekly jobless claims Thursday followed by key monthly jobs data Friday. The Dow Jones Industrial Average was down 110 points heading into the final forty-five minutes of trading. The CBOE Volatility Index (.VIX) gained 1.87 to 41.80. Approximately 5.9 million calls and 5.4 million puts have traded across the options exchanges.




Unusual Options Activity

• Valero (VLO) options volume was running 7X the usual, with 178,000 contracts traded and call volume representing 53 percent of the volume.

• Options activity in the Select Sector Industrials (XLI) rose to 3X the usual, with 92,000 contracts traded and call volume representing 89 percent of the volume.

• Data Domain (DDUP) options activity was running 10X the usual. 63,000 contracts traded and call volume accounting for 71 percent of the activity.

Increasing volume was also seen in TIVO, DISH, and Gilead Sciences (GILD).

Bullish Flow

• A number of individual biotech names Wednesday. GILD was mentioned earlier. Human Genome Sciences was up 42 cents to $3.05 and 6,500 calls traded, compared to 170 puts. HGSI Jun and Jul 5 calls being bought. Celgene (CELG) was up 97 cents to $45.25 and 17K calls traded, compared to 7,150 puts. Jun 50 and Jul 45 calls leading the flow. OSI Pharmaceuticals (OSIP) was up 74 cents to $31.84 and 7777 Oct 35 calls traded.
  

• Wal-greens (WAG) was down 48 cents to $31.14 and options volume was running 2X the usual. Most of the activity was due to one spread trade, where a strategist bought 4,500 Oct 32.5 - 36 call spreads and sold 4,500 Oct 27.5 puts. All legs of the trade hit on PHLX. Looks like they paid $1.25 for the call spread and collected $1.075 for the puts. No news on the stock Wednesday. Co. reported monthly sales (+1%) yesterday. Implied volatility was up modestly, to 34 from about 33 yesterday.

Bearish Flow

• More than 23K iShares Emerging Markets (EEM) June 32 puts traded Wednesday. Shares were down $1.52 to $32.62 and some investors were buying the puts as part of bearish spreads. For example, one strategist bought the Jun 29 - 32 put spread 7000X for 71 cents. Another bought the June 30 - 32 spread 8200X for 57 cents.
  

• GE was down 25 cents to $13.55 and July 13 puts were seeing some interest. 21.7K traded early and 87 percent hitting ask-side. While existing open interest was 34K, ISEE sentiment data indicated that a significant percentage (77 percent, or 8,900 contracts on ISE) of Wednesday's volume were opening customer put buyers. No news on GE Wednesday. Earnings due out July 17. Implied volatility was up to 52, from about 47 late Tuesday

Implied Volatility Movers

• Implied volatility was elevated in ETFC ahead of a presentation at a Sandler O'Neill conference Thursday. Shares were down a nickel to $1.41 and July 1 puts were active after an investor bought 20000 contracts for 15 cents. Meanwhile, implied volatility was up to 160, up from 154 the day before.

Implied volatility was also higher in:

• Valero (VLO)
• Mosaic (MOS)
• Texas Instruments (TXN)

Meanwhile, implied volatility was lower in:

• TIVO
• BofA (BAC)
• Wal-Mart (WMT)

    



























































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