Unusual Options Activity Review: YHOO, VPHM, GFI, SFLY, RIMM, MS, NG, FSLR, .VIX, .SPX, GLD, SLV

Posted December 15th, 2011 by Joseph Cusick in Unusual Activity

Unusual Options Activity Review For Wednesday, December 14, 2011

Bullish Trading
Yahoo (YHOO) shares lost 40 cents to $15.02 Wednesday and options volume on the Internet giant was 104,000 calls and 52,000 puts. One of the top trades was a buyer of 10,000 January 17.5 calls for 30 cents per contract. It wasn't a straight bullish play on YHOO, as the call options were tied to a block of 200,000 shares at $15 per share (bought calls, sold stock). Nevertheless, the call purchase seems to reflect expectations that shares might rally beyond $17.5 through the January expiration, which represents a 16.5 percent gain over the next 37 days. Separately, a January 14 ñ 21 risk-reversal traded on Yahoo for 59 cents, 10000X. In this bullish combo, the investor apparently bought 10,000 January 21 calls on the stock for 4 cents and sold 10,000 January 14 puts at 63 cents. While the risk-reversal might be a closing trade, it also seems to reflect expectations for a move higher in a Yahoo shares in the weeks ahead. The stock ticked higher last week on reports Alibaba is seeking $4 billion in finance a buyback of the 40 percent stake in the company owned by Yahoo. Wednesday's bullish trading might be a play on the further developments on the buyout front before the January 21, 2012 expiration.

Bullish trading was also seen in VioPharm (VPHM), Gold Fields (GFI), and Shutterfly (SFLY).

Bearish Trading
Shares of Blackberry-maker Research In Motion (RIMM) fell to their lowest levels since May 2004 Wednesday ahead of earnings. The company is due to release its results after the closing bell Thursday. Shares lost 40 cents to $15.08 Wednesday. Meanwhile, options volume on the stock included 62,000 calls and 94,000 puts. December 16 puts, which are now 92 cents in-the-money and expiring the day after RIM reports results, were the most actives. 18,458 traded, including a morning buyer of 2,500 contracts for $1.38 per contract. December 14 puts and December 15 calls, which are both out-of-the-money, were the next most actives. Some players were likely taking positions in short-term OTM options on the stock in anticipation of some post-earnings volatility in the share price. The stock tumbled 19 percent on 9/16 after earnings were last reported.

Bearish trading was also seen in Morgan Stanley (MS), Novagold (NG), and First Solar (FSLR).

Index Recap
Options action is heating up in the index market heading into the options expiration. 668,000 calls and 823,000 puts traded on the CBOE Volatility Index (.VIX), S&P 500 Index (.SPX) and other cash indexes Wednesday, according to Trade Alert data. Trading is likely to be very active Thursday as well. Since the settlement values for many index contracts are computed using opening prices on Friday, the last day to trade the contracts is on the Thursday before expiration. So players in the index market will be busy closing and adjusting December options before the contracts expire. Wednesday, for example, the most actives in the index market included December 1250 calls, December 1150 puts, December 1200 puts and December 1225 calls on the S&P 500, which lost 13.91 points to 1,211.82. Some players were likely selling these out-of-the-money puts and calls to salvage any remaining time value before the expiration.

Analyzing the ETF Market
Options volume picked up in the metals ETFs, as gold and silver prices fell sharply Wednesday. SPDR Gold Trust (GLD) lost $5.56 to $152.89 after the yellow metal plummeted $85 to $1578 an ounce. Options volume in GLD, which is an exchange-traded fund that holds the actual metal, was 3X the daily average. 285,000 calls and 316,000 puts traded in the product, led by high volume in the December 150 and 155 puts on the ETF. Meanwhile, iShares Silver Fund (SLV) gave up $1.75 to $28.07 after the white metal lost $2.36 to $28.90. Options volume in the sliver ETF was 2.5X the daily average. 142,000 calls and 172,000 puts traded in the product, led by increasing volume in December 28 and 30 puts.

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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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