Unusual Options Activity Review - BAC, GILD, NYT, NOC, EK, CLX, ELX, TMO, .VIX, XLE
Unusual Options Activity Review For Monday, July 18, 2011
Bank of America (BAC) options were heavily traded Monday ahead of earnings. The bank, and component of the Dow Jones Industrial Average, is due to release results Tuesday morning. Shares fell to 52-week lows Monday and finished down 28 cents to $9.72 ahead of the news. Meanwhile, in BAC options, 529,000 calls and 341,000 puts traded on the bank. September 9 puts were the most actives. 73,565 traded. 63,780 September 10 calls changed hands. Some of the action was due to spread trading. In morning action, one investor sold 5,500 September 9 puts at 28 cents to buy the September 10 ñ 11 call spread at 35 cents, 5500X. They paid a 7-cent net debit for the three-way spread and might be looking for shares to move beyond $11 through the September expiration and or they are willing buyers of the stock at $9 per share, which is the strike price of the short put options.
Bullish trading was also seen in Gilead Sciences (GILD), New York Times (NYT), and Northrop Grumman (NOC).
Eastman Kodak (EK) put options saw heavy volume Monday. Shares fell to new 52-week lows and finished the day down 22 cents to $2.53. Options volume in EK was 147,000 puts and 36,000 calls. One of the top trades of the day was part of a combo. In this play, the strategist bought 5,000 October 2.5 puts at 36 cents and sold 5,000 October 3 calls at 25 cents. In other words, they bought the October 2.5 ñ 3 bearish risk-reversal for an 11-cent net debit. A similar trade surfaced in the September 2.5 ñ 3 risk-reversal, which traded at 10 cents, 3515X. EK shares are down nearly 30 percent month-to-date and these bearish trades might have been initiated to hedge or "collar" a position in shares. Or, the risk-reversals might be outright bets that Eastman Kodak shares will continue trading lower in the weeks/months ahead.
Bearish flow also surfaced in Clorox (CLX), Emulex (ELX) and Thermo Fisher Scientific (TMO).
Call options on the CBOE Volatility Index (.VIX) were busy Monday. VIX hit a morning high 21.93, its best levels in almost a month, and finished the day up 1.42 to 20.95. Options volume in the VIX trading pit included 365,000 calls and 145,000 puts. July 25 calls, which saw very heavy trading last week, were the most actives. 43,949 traded. July 22.5 calls traded 37,947 contracts. It's likely that some investors were closing out positions in the July contracts and opening new ones in August, as the Aug 22.5 and 24 calls on the volatility index were also busy Monday. Although VIX moved higher on the day, the July calls are at risk of expiring out-of-the-money. Options on the volatility index expire Wednesday and the last day to trade the July contract is Tuesday.
An interesting spread trades in the Energy Select Sector Fund (XLE) Monday. XLE, which is the exchange-traded fund that holds all of the energy-related names from the S&P 500, finished the day down 26 cents to $76.60 after crude oil slipped $1.15 to $96.45 per barrel. In options trading, the top trades in XLE were part of a spread, in which the strategist bought 15,000 August 77 puts at $2.56 and sold 15,000 August 75 puts at $1.69. In other words, they bought the Aug 77 ñ 75 put spread for an 87-cent net debit. Excluding commissions, the spread offers a potential $1.13 payout if shares fall to $75 or less through the August expiration, which represents a 2.1 percent decline over the next 32 days.
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