Unusual Options Activity Review: INTC, S, BSX, SFSF, WFC, BIIB, MF, IO, .VIX, .SPX, XLK
Unusual Options Activity Review For Monday, October 17, 2011
Put sellers surfaced in Intel (INTC) ahead of earnings. Shares lost 22 cents to $23.28 and one strategist sold a 10,000-contract block of October 23 puts on the chipmaker at 33 cents per contract. Separately, a 12,500-contract block of November 21 puts traded at 31 cents when the market was 31 to 32 cents. 17,000 contracts traded and data indicate opening activity in these out-of-the-money puts. The put selling in Intel is interesting because it comes ahead of the company's profit report ñ which is due Tuesday afternoon. Total volume on the stock was 87,000 calls and 90,000 puts and implied volatility jumped 10.5 percent to 36.5. Players have been active in the name in the past week heading up to the report and Monday's put writes seem to reflect expectations that shares will hold recent gains after the earnings report is released. Intel edged a bit lower Monday, but is up 21.3 percent in less than two months.
Bullish trading was also seen in Sprint (S), Boston Scientific (BSX), and Success Factors (SFSF).
Wells Fargo (WFC) shares lost $2.25 to $24.42 and options on the bank saw brisk trading Monoday after the company reported a quarterly profit of 72 cents per share on $19.63 billion in revenues. The Street was expecting 73 cents on $20.34 billion. Shares sank on the news and options volume in Wells Fargo was 88,000 calls and 80,000 puts. The top trade was a January 20 ñ 30 risk-reversal at 38 cents, 10000X. That is, the investor sold 10,000 January 30 calls on the stock at 38 cents and bought 10,000 January 20 puts at 76 cents. This bearish combination might have been initiated by a shareholder to hedge or "collar" a position in Wells Fargo shares. Or, it might be a straight bet that the bank will continue its bearish trend through January 2012.
Bearish trading was also seen in Biogen Idec (BIIB), MF Global (MF), and ION Geophysical (IO).
CBOE Volatility Index (.VIX) saw a big move and gained 5.15 points to 33.39 Monday. VIX, which tracks the expected volatility priced into S&P 500 Index (.SPX) options, moved higher after the SPX lost 23.72 points to 1,200.96. The S&P is now testing a previous support area around 1,200. Meanwhile, VIX options were actively traded heading into the expiration. While most October options contracts expire at the end of the week, VIX is unique because the expiration is on a Wednesday. Therefore, Tuesday is the last day to trade the VIX October contract. Volume in the VIX pit Monday was 220,000 calls and 104,000 puts. While October 35 calls and 30 puts were heavily traded heading into the expiration, December 40 calls were the most actives. 31,100 traded and some investors might have been taking positions in these upside calls on expectations for another spike in the VIX before yearend.
Analyzing the ETF Market
SPDR Technology Fund (XLK) loses 41 cents to $25.59 and 25,000 contracts traded on the ETF Monday, which is rather light volume for the product. However, the flow was very lopsided, as 21,000 calls and 4,235 puts traded on the ETF. The top trade of the day was a January 2013 20 ñ 30 call spread that traded at $5.85, 3000X on ISE. Data indicate that a new position was opened and the spread trader is probably taking a longer-term position in the spread on the view XLK will settle above $30 (~17.2%) through the January 2013 expiration. If so, the spread will widen to $10 and the profit (excluding transaction costs) is $10 minus the debit paid, or $4.15.
This article is provided for informational purposes only. No statementin this article should be construed as a recommendation to buy or sell asecurity or to provide investment advice. The content provided has beenobtained from sources deemed reliable but is not guaranteed as toaccuracy and completeness. optionsXpress makes every effort to providetimely information to its recipients but cannot guarantee specificdelivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the "Disclosure Statement for Futures and Options" prior to investing in futures or options.
For investments using a straddle or strangle options strategy thepotential loss is unlimited. Multi-leg option strategies are subject tomultiple commissions. Profits may be eroded by the commission expendedto open and close the positions and other risks apply.
View Joseph Cusick's post archive >