Unusual Options Activity Review: IDCC, TK, ABX, IDTI, FSLR, MAT, IOC, IGT, .SPX, .VIX, DBC

Posted September 29th, 2011 by Joseph Cusick in Unusual Activity

Unusual Options Activity Review For Wednesday, September 28, 2011

Bullish Trading

Interdigital (IDCC) bucked the bearish trend Wednesday. Shares added $1.74 to $53.23 and have staged a two-day 7.5 percent gain after the company said Tuesday that its review of strategic alternatives is ongoing. The stock was highlighted again Wednesday in a Forbes article titled "Interdigital: Confusion Reigns Over Potential Consortium Bids". Suffice it to say, buyout speculation is rampant. IDCC is moving higher and Wednesday's options volume in the name included 10,000 calls and 2,850 puts. Ambitious traders were active in the October 70 calls, which are 31.5 percent out-of-the-money and expiring in 23 days. 2,600 traded. October 60 and 90 calls on Interdigital saw interest as well.

Bullish trading was also seen in Teekay Corp (TK), Barrick Gold (ABX), and Integrated Device Technology (IDTI).

Bearish Trading

First Solar (FSLR) came under pressure after a Wall Street analyst cut earnings estimates and reiterated a Sell rating on the stock. Shares lost $7.52 to $64.75. Meanwhile, options volume in the solar energy company hit 2.5X the daily average. 21,000 calls and 46,000 puts traded on the stock. The top trades of the day were part of a spread, in which the strategist apparently bought 4,600 October 60 puts at $3.80 and sold 4,600 October 50 puts at $1.43. The spread, for a $2.37 net debit, surfaced when the stock was trading at $65.72. FLSR is down 1 percent since that time and the market on the spread is $2.46 to $2.61. It will be worth $10 if shares fall to $50 or less through the October expiration, which represents a 22.8 percent drop over the next 23 days.

Bearish trading was also seen in Mattel (MAT), Interoil (IOC), and International Game Technologies (IGT).

Index Recap

Overall options volume remains relatively light despite the volatility Wednesday, with 614,000 puts and 300,000 calls traded across the S&P 500 Index (.SPX), the CBOE Volatility Index (.VIX) and the other cash indexes, which is only about 68 percent of the recent average daily volume, according to Trade Alert data. After a 12.43 point gain Tuesday, the S&P 500 Index tumbled 24.32 points to 1,151.06 Wednesday. Meanwhile, VIX, which tracks the expected volatility priced into S&P 500 Index options, jumped 3.37 to 41.08. The top index options trades were in the S&P after one player apparently sold 10,000 SPX Oct 1,170 puts at $51 and bought 10,000 Oct 1,150 puts at $42. The spread, for a $9 net credit, is possibly a closing trade after the index made a decisive move towards the lower strike (1150) of the spread.

Analyzing the ETF Market

Powershares Commodity ETF (DBC), which tracks the price action of various commodities like wheat, oil, and aluminum, was trading down 43 cents to $26.66 at midday. It fell another 30 cents and closed at $26.36. Options volume hit 5.5X the daily average for the product. The bulk of the activity was in the January 20 puts, which are 24.1 percent out-of-the-money and expiring in 114 days. 10,790 traded against 296 in open interest. The top trade is a block of 7370 contracts at the 25-cent asking price. Looks like an opening put buyer and perhaps a bet that a weakening global economy will continue to take a toll on worldwide commodities prices in the months ahead.

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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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