Unusual Options Activity Review: TM, MWW, ACF, SNE, JCP, BCS, XL, ISIS, .VIX, .SPX, .OEX, FXE
Unusual Options Activity Review For Friday, September 9, 2011
Bullish Trading
An interesting spread traded in Toyota Motors (TM) Friday. Shares of the Japanese automaker fell to new 52-week lows and were down $1.49 to $67.88. Meanwhile, a three-way options play was initiated in Toyota Friday morning. In this strategy, the investor apparently sold 2,500 September 72.5 calls on the automaker at 13 cents per contract. They also bought 2,500 October 70 calls at $1.90 and sold 2,500 October 75 calls at 49 cents.
The spread looks like rolling activity. That is, the investor is selling-to-close a position in out-of-the-money September calls before they expire at the end of next week, while opening a new bullish position in the October 70 ñ 75 call spread for a $1.41 net debit. They probably had a positive view on the stock through September, but are now buying one more month of time for the bullish trade to play out. However, instead of holding straight calls, they're initiating a spread strategy instead.
Bullish trading was also seen in Monster Worldwide (MWW), Abercrombie (ACF), and Sony (SNE).
Bearish Trading
Bearish traders were active in JC Penney (JCP) Friday. The stock has not escaped the sell-off and was down 63 cents to $25.44. Options volume in JCP includes 10,000 calls and 15,000 puts. Average daily volume in the retailer is about 10,000 (puts and calls). The top trades are part of a spread, in which 3500 October 24 puts were apparently bought at $1.35 and 3500 October 21 puts sold at 56 cents. In other words, an Oct 21 ñ 24 put spread was bought for a 79-cent net debit. The spread traded multiple times and volume in both contracts was more than 6,200. It's bearish play with a max potential pay-off if shares fall to $21 through the October expiration, which represents a 17.5 percent decline over the next 42 days. A shareholder might have initiated the spread to help hedge JCP stock.
Bearish trading was also seen in Barclay's (BCS), XL Capital (XL), and Isis Pharmaceuticals (ISIS).
Index Recap
CBOE Volatility Index (.VIX) surged amid increasing activity in the index market Friday. 772,000 calls and 1.23 million puts have traded on the S&P 500 Index (.SPX), the S&P 100 Index (.OEX), and other cash indexes, which compares to 591,000 calls and 727,000 puts traded Thursday. CBOE Volatility Index (.VIX), which tracks the expected volatility priced into SPX options, hit a high of 40.74 and was recently up 5.14 points to 39.46. The jump in the market's "fear gauge" reflects the negative or bearish sentiment that has resurfaced in September. The S&P 500 Index is down 5.3 percent during the first six trading days of the month and CBOE Volatility Index has rallied 26.4 percent during that time. Fear is back.
Analyzing the ETF Market
CurrencyShares Euro Trust (FXE) saw another day of brisk trading. As noted in Thursday's wrap, 14,000 calls and 80,000 puts traded on the ETF. Friday, shares lost another $2.25 to $136.09 on a rough day for the European currency. The fund is designed to track the price action of the EUR/USD currency pair (X100) and has now given up 18.8 percent since August 29. Ouch! Shares have fallen to six-month lows on concern about the outlook for the Eurozone and the longer-term fate of the European currency. Consequently, players are actively taking positions in options on FXE in anticipation of the Euro's next move. Another 89,000 puts and 24,000 calls traded in the product Friday. September 138 puts, 139 calls, and 140 puts were the most actives, as some investors were likely closing positions while others took new ones in anticipation of volatility in the currency market in the days ahead. September options expire at the end of next week.
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Joseph Cusick currently serves as the Senior Vice President of Education and a Senior Market Analyst for optionsXpress. Mr. Cusick seeks out common sense and technologically scalable educational pathways for self-directed investors of all experience levels. He is largely responsible for ramping up delivery of online and offline seminars to customers and potential clients worldwide. Prior to serving in his current role, Mr. Cusick immersed himself in the broker side of optionsXpress by managing his own book of business. Prior to joining optionsXpress, Mr. Cusick served as a market maker and portfolio manager at the Chicago Board of Options Exchange. Joseph is a graduate of Marquette University and holds his Series 4, 7 and 63 registrations with FINRA.
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