Unusual Options Activity Review - V, MA, AXP, WPI, REE, M, CECO, TSLA, NOVL, LGF, .SPX, .VIX, XLE

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Bullish Flow

Visa (V) call options were busy amid relative strength in the sector Monday MasterCard (MA) gained $6.35 to $224.65. Capital One (COF) and American Express (AXP) finished with gains as well. Meanwhile, Visa added another $2.08 to $70.81 and is now up more than 6 percent in the past five trading sessions. Some options traders are taking notice. 60,000 calls and 21,000 puts traded on Visa Monday. March 75 calls were the most actives. 9,115 traded and, with 77 percent trading at the ask, it looks like buyers were dominating the flow. January 70, February 75, and April 80 calls were among the most actives as well.

Bullish order flow was also seen in Watson Pharmaceuticals (WPI), Rare Earth (REE), and Macyís (M).



Bearish Flow

Put volume picked up in Career Education (CECO). Shares lost 21 cents to $20.28 and options volume hit 4.5X the average daily, with 4,625 puts and 70 calls traded on the ticker. The action was concentrated in the February 17 puts. 4,028 traded, including a block of 2,000 at 45 cents when the market was 30 to 45 cents. Since there is no existing open interest in the contract, it looks like a put buyer taking a new position and bracing for a move below $17 by the February expiration. A shareholder might have initiated the purchase as a hedge or it might be an outright bearish bet on the for-profit education company. Earnings are expected around February 17 and possibly before the expiration.

Bearish flow also picked up in Tesla Motors (TSLA), Novell (NOVL), and Lions Gate Financial (LGF).



Index Trading

Volume was very light in the index market, as many institutional players are away for the holidays and others were left stranded by a massive storm across the Northeast. 120,000 calls and 157,000 puts traded across the S&P 500 Index (.SPX) and other cash indexes, which is only about 30 percent the normal volume, according to data from Trade Alert. However, while volume was low, implied volatility is picking up. The CBOE Volatility Index (.VIX) added 1.20 to 17.67 and has rallied 14.4 percent over the past two days. The gains in VIX, which tracks the expected volatility priced into SPX options, is a sign that the market is beginning to ìprice inî the possibility of increasing volatility in early 2011.



ETF Trading   

The Energy Select Sector Fund (XLE) saw more than twice the average daily options volume today. Shares finished down 24 cents to $67.17 after crude oil (Feb) lost 72 cents to $90.79 per barrel. In the options market, the top options trade in the ETF was a spread, in which an investor sold 18,000 December Quarterly 66 calls at $1.26 and bought 30,000 January 68 calls at 84 cents. This was likely a roll of a position opened earlier this month ahead of the expiration. Quarterly options expire at the end of each calendar quarter and the Decembers come off the board at the end of this week.

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