Unusual Options Activity Review - KBH, BZH, EMR, BBBY, CPB, HDY, RFMD, MDRX, .XEO, XLB
Unusual Options Activity Review For Wednesday, June 22, 2011
Bullish Flow
Call options on KB Homes (KBH) were busy Wednesday ahead of a report on New Home Sales. The data will be released Thursday morning. KBH shares added 13 cents to $11.83 ahead of the news and options volume was 2X the average daily for the homebuilder. 10,000 calls and 900 puts traded in the name. August 12 calls, which are now 17 cents out-of-the-money, were the day's most actives in KBH. More than 5,000 contracts traded. August 15 and July 12 calls saw brisk trading as well. KB Homes shares have rallied 12.34 percent since June 10. Wednesday's call buyers might be looking for the New Home Sales to serve as a catalyst that sends the stock higher still.
Bullish trading was also seen in Beazer Homes (BZH), Emerson Electric (EMR), and Bed, Bath and Beyond (BBBY).
Bearish Flow
Campbell Soup (CPB) has seen two days of bearish trading. July and August 34 puts were the most actives Tuesday. Shares lost 24 cents to $33.98 Wednesday and July 33 puts saw the most volume. 7,680 contracts traded against open interest of 576 contracts. The contract, which is 2.9 percent out-of-the-money and expires in 23 days, traded at an average price of 24.5 cents. Wednesday's heightened activity was apparently driven by a (unconfirmed) brokerage recommendation to buy July 33 puts ahead of the soup company's Analyst Day, which is slated for July 12 and inside the expiration.
Bearish flow also surfaced in Hyperdynamics (HDY), RF Micro Devices (RFMD), and Allscripts (MDRX).
Index Trading
The European-style S&P 100 Index (.XEO) saw more volume than usual. XEO is an index that tracks the same stocks as the S&P 100, or OEX (Notice that the ticker is OEX backwards). The only difference between the two indexes is in the way the options settle. OEX options settle American-style and can be exercised (assigned) at any time prior to the options expiration. Like most other index products, XEO options are European-style and exercise (assignment) can only happen at the expiration. Some investors were showing interest in the European-style index Wednesday, as 8,450 puts and 1,650 calls traded on the XEO. The index lost 3.88 to 572.46 and most of the volume was due to put spread trading in the Weekly options that expire 6/24.
ETF Trading
Basic Materials Select Sector Fund (XLB) erased early gains and lost 15 cents to $37.74 on the day. A noteworthy options trade surfaced in the ETF after an investor bought 16,900 July 39 calls at 47 cents and sold 16,900 July 37 puts at 44 cents. They paid 3 cents for this bullish risk-reversal and appear to be opening a new position. The combo traded more than once and volume in both contracts surpassed 30,000. It's a bold move, as the calls are 3.3 percent out-of-the-money and expire in three and half weeks. In addition, if shares fall below $37 through the expiration, the strategist will be on the hook to buy 100 XLB shares at $37 per every put contract that is sold.
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