Unusual Options Activity Review: TEVA, V, CELG, AMR, INTC, JEF, MCP, BK, .VIX, EWJ
Unusual Options Activity Review For Tuesday, September 20, 2011
Bullish Trading
Options action picked up in Teva Pharmaceuticals (TEVA) Tuesday. Shares of the Israeli-based generic drugmaker finished the day down $1.11 to $36.62. Meanwhile, 23,000 calls and 7,300 puts traded in the name. November 40 calls were the most actives in the stock. 5,400 changed hands. The action also included October 37.5 - 40 call spreads. In this strategy, one strategist apparently bought 1,000 Oct 37.5 calls on TEVA at $1.06 and sold 1,000 October 40 calls at 29 cents. The spread, for a 77-cent net debit, is a bullish play. It offers its best pay-off if shares really to $40 or more through the October expiration, in 31 days. The stock has been pounded for a 35 percent loss since January and Tuesday's spread trader is possibly buying a call spread, rather than stock, as a way to play the stock for a rebound in the weeks ahead.
Bullish trading was also seen in Visa (V), Celgene (CELG), and AMR.
Bearish Trading
Bearish traders circled chipmaker Intel (INTC) Tuesday. Shares added 27 cents to $22.20 on the day and put volume totaled 125,000 contracts. Typical volume is about 51,000 contracts and call activity amounted to 75,000 contracts. October 23 puts, which are 80 cents in-the-money and expiring in four and a half weeks, were the most actives. 32,000 traded hands, including a spread, in which 5,000 October 23 puts were apparently bought at $1.22 and 5,000 October 22 puts sold at 71 cents. In other words, an Oct 22 -23 put spread was apparently bought on the chipmaker for a 51-cent net debit. The spread is bearish, as it offers its best payoff (.49 minus transaction costs) if Intel shares fall back below $22 through the October expiration, which is in 31 days.
Bearish trading was also seen in Jefferies (JEF), Molycorp (MCP), and Bank of New York (BK).
Index Recap
Trading was relatively quiet in the VIX pit heading into the expiration. CBOE Volatility Index (.VIX) edged up just .13 points to 32.86. Meanwhile, 237,000 calls and 189,000 puts traded on the index Tuesday, which is about typical volume for the product. September VIX options expire Wednesday and the last day to trade the Sep contracts was Tuesday. Consequently, VIX Sep 32.5 puts, 35 calls, 30 puts and 32.5 calls were the most actives. These contracts were either at-the-money or out-of-the-money heading into the expiration and premium sellers were probably driving a lot of the flow -- exiting positions to salvage the remaining time value before the contracts expire.
Analyzing the ETF Market
iShares Japan Fund (EWJ) lost a penny to $9.58 and options volume in the exchange-traded fund rose to 9X the daily average after 108,000 calls and 3,123 puts traded on the ETF Tuesday. December 12 puts saw the bulk of the volume and included a 99,000 contract block at 2 cents per contract when the market was 2 to 7 cents. 107,200 changed hands on the day and the activity was probably liquidating trades. The contract is $2.42 out-of-the-money and has 109,608 in open interest. Some investors were likely closing positions in the contract and giving up hopes for a rally beyond $12 in EWJ through mid-December.
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About Joseph Cusick
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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