Unusual Options Activity Review - ANR, LVS, GM, NDAQ, CRI, MBI, BZH, FAST, .VIX, QQQ
Unusual Options Activity Review For Friday, July 1, 2011
Alpha Natural Resources (ANR) shares are up $1.29 to $46.73 and call options on the coal producer are very actively traded today. The activity might be a delayed reaction to an analyst upgrade. Societe General upped the stock to Buy yesterday. For whatever reason, 23,000 calls have traded in ANR so far today, which is more than 10X the day's put volume. The top trades are part of a spread, in which the strategist apparently bought 2,500 Dec 55 calls at $1.85 and sold 2,500 Dec 65 calls at 49 cents. The spread, for a net debit of $1.36, offers a potential $8.64 pay-off if shares rally to $65 or more through the expiration. It's a high risk-reward play because the breakeven at expiration is at $56.36 per share, which represents a 20.6 percent rally from current levels.
Bullish trading was also seen in Las Vegas Sands (LVS), GM, and NASDAQ OMX Group (NDAQ).
Carter's (CRI), the Atlanta, GA apparel clothing maker, is trading up 78 cents to $31.54 and options volume is running 10X the average daily. 4,290 puts and 250 calls traded in the name so far. The top trades are part of spread. The investor bought 1,850 September 30 puts at $1.85 and sold 1,850 September 25 puts at 40 cents. They paid $1.45 for the spread and appear to be positioning for a downside move in shares. The max payout, of $3.55 (excluding commissions), happens if shares fall to $25 or less through the September expiration. A shareholder might have initiated the position to help hedge stock.
Bearish flow also surfaced in MBIA (MBI), Beazer Homes (BZH), and Fastenal (FAST).
CBOE Volatility Index (.VIX) is down 1.05 to 15.47. VIX, the market's "fear gauge", is on a five-day losing skid and has suffered a 26.7 percent loss on the week. The volatility index hit a low of 15.12 today and levels not seen since May 31. VIX tracks the expected or implied volatility priced into S&P 500 index options and tends to ease when stocks rally. Very low readings are sometimes viewed as a sign of excessive bullishness and complacency among investors, which sometimes sets the table for short-term market tops. For example, on May 31, the index fell to 15.12 and stocks had a rough start to the month of June. From the last day of May through June 16, the S&P 500 lost 5.5 percent.
The biggest options trade Friday is in the Powershares QQQ (QQQ) exchange-traded fund. The Qs is the ETF that holds the NASDAQ 100 stocks. Shares are up 90 cents to $57.95 and a 40,000 contract block of Aug 56 puts traded at 81 cents. The block was sold as part of a put butterfly. The strategist also bought 20,000 August 54 puts at 42 cents and bought 20,000 August 58 puts at $1.55. Therefore, they paid 35 cents per Aug 54 ñ 56 ñ 58 put butterfly spread and appear to be targeting a move in the Qs back towards $56 through the August expiration, which is in 49 days. QQQ is on a five-day winning streak and is up 7.7 percent since June 17.
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