Unusual Options Activity Review - FIS, MYL, INTC, MU, MAR, SFI, FAF, OCR, .SPX, .VIX, EEM
An interesting three-way spread traded in Fidelity National Services (FIS), a Jacksonville, FL banking and payment technology solutions provider. Shares finished the day up 4 cents to $28.53 and the investor apparently sold 900 January 22.5 puts that expire in 2012 at $1.05 each and bought the Jan2012 30 ñ 32.5 call spread at $1.20, 900X. The spread traded 1,100X and appears to be a new position. In this strategy, the strategist is selling puts to finance the call spread. It's an aggressive play and one that has risk to the downside beyond the net debit paid because the 22.5 puts are uncovered. If shares tank through 2012, the strategist is on the hook to buy the stock at $22.5 per share.
Bullish trading was also seen in Mylan Labs (MYL), Intel (INTC), and Micron Technology (MU).
Marriott (MAR) loses 28 cents to $40.53 and options volume hit 10X the recent average daily after 13,000 puts and 150 calls traded on the hotel operator. The top trades were part of a spread, in which an investor apparently sold 6,000 January 40 puts at 55 cents and bought 4,000 July 37 puts at $2.20 per contract. At the end of the day, 7,745 January 40 puts traded and volume in the July 37s increased to more than 5,000. The action is likely a roll of a bearish position or a hedge out from January to July. Shares performed well in 2010, but have drifted 1 percent lower so far in 2011. An investor might have initiated the put purchase in the January options as a hedge, but is now rolling the position out seven months ahead of next week's options expiration (11 days).
Bearish flow also surfaced in iStar Financial (SFI), First American (FAF), and Omnicare (OCR).
Overall volume in the index market was relatively light Monday, with 436,000 calls and 461,000 puts traded across the S&P 500 Index (.SPX) and other cash indexes. The ten most actives were all on the CBOE Volatility Index (.VIX), which added .40 to 17.54. VIX Feb 40 puts were at the top of the list. 34,655 traded. February 30 calls, February 37.5 calls, March 27.5 puts, March 35 calls, and April 30 calls were the most actives as well. Some volatility traders are now setting their sights on contracts that expire in one month or two rather than the January VIX options, which expire in 8 days.
The top options trades in a relatively slow day of options action Monday were in the iShares Emerging Markets Fund (EEM). Shares lost 49 cents to $46.76 and one investor sells 45,000 February 42 puts at 32 cents and buys 30,000 February 46 puts at $1.21. This February 46 ñ 42 (1x1.5) put ratio spread, for a net debit of 73 cents, is probably a hedge. That is, an investor was setting up the spread to offset some of the risk of holding shares of companies from the emerging markets. Shares of the Emerging Markets ETF are in the midst of a four-day 3.2 percent skid.
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