Unusual Options Activity Review: X, OPTR, KKD, PANL, CEDC, JEF, MLM, AXL, .SPX, .OEX, .VIX, XRT, SKS, M, TGT,

Posted November 4th, 2011 by Joseph Cusick in Unusual Activity

Unusual Options Activity Review For Thursday, November 3, 2011

Bullish Trading

US Steel (X) options were actively traded Thursday. Shares added 58 cents to $26.55 and options volume on the steelmaker was 51,000 calls and 17,000 puts. January 35 calls, which are 31.8 percent out-of-the-money and expire in 78 days, were the most actives. More than 12,000 traded, including a 9,450-contract block traded at the $1.08 asking price. November 27, November 30, and January 27 calls were among the most actives on US Steel Thursday as well. There was no news on the ticker. Some investors might be buying upside calls on the stock after data last week showed iron ore prices ñ an important ingredient in steelmaking ñ falling sharply on declining demand from China. US Steel shares rallied 11.6 percent on the news Friday.

Bullish trading was also seen in Optimer Pharmaceuticals (OPTR), Krispy Kreme (KKD), and Universal Display (PANL).

Bearish Trading

Central European Distribution (CEDC), a Mount Laurel, NJ beverage exporter, has been under pressure recently. The stock is off 30.1 percent since last Monday and touched an intraday low of $4.58 Thursday. However, shares rebounded from its worse levels and finished the day up one penny to $5.04. Meanwhile, options on the stock saw increasing volume, with 8,800 puts and 1,320 calls traded in CEDC. November 5 puts, which are now four cents out-of-the-money, were the most actives. 3,060 traded. November 4, December 2.5, and December 6 puts on the stock saw interest as well. Some players were likely buying puts on the company amid concerns the recent stock slide will continue. The bearish trading is possibly a play on earnings, which are due out Friday morning.

Bearish trading was also seen in Jefferies (JEF), Martin Marietta Materials (MLM), and American Axle (AXL).

Index Recap

Although stock market averages continue to make wide swings from one day to the next, volume has been relatively light in the index market this week. The exception was Tuesday, when the S&P 500 Index (.SPX) lost 35 points and index option volume rose to 1.9 million contracts. Since that time, trading has been relatively slow, with approximately 531,000 calls and 693,000 puts traded across the S&P 500 Index, S&P 100 Index (.OEX), and other cash indexes Thursday, which is about 83 percent recent average daily volume, according to Trade Alert data. The S&P 500 Index added 23.25 points to 1,261.15 and CBOE Volatility Index (.VIX), which tracks the implied volatility priced into S&P 500 Index options, lost 2.24 to 30.50. The top, or largest, index trades Thursday were in the SPX pit after a Nov 1230 ñ 1210 traded on the index for $5, 15000X. It appears that an investor bought the spread (bot 1230s and sold 1210s) and, if so, is bracing for the index to fall below 1210 through the November expiration, which represents a 4.1 percent market decline over the next two weeks.

Analyzing the ETF Market

SPDR Retail Trust (XRT) hit a low of $51.60 Thursday morning after a number of large retailers, including Saks (SKS), Macy's (M), and Target (TGT), posted October same store sales numbers that fell short of expectations. Shares later rebounded, however, and XRT finished the day up 19 cents to $53.26 ñ up 3.2 percent from session lows. In options action, 154,000 puts and 19,000 calls traded on the ETF Thursday. Like Wednesday, the largest positions were part of a November 43 ñ 47 ñ 51 put butterfly. The spread was bought for a 51-cent debit, 10000X, traded again at 64 cents, 15000X Thursday morning. If bought, this put fly is bearish spread, with max profits if XRT settles at $47 at the expiration, or down 11.5 percent over the next 15 days. While the positioning might have been a play on monthly same store sales numbers released Thursday, the sector might also see volatility around tomorrow's key jobs data and on November 15 when a report on October Retail Sales is released.

----------------------------------------------------------------------------------------

Disclaimers
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.

"

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.

View Joseph Cusick's post archive >