Unusual Options Activity Review: RVBD, FTR, YHOO, DRI, CTRP, KR, VTR, TER, .SPX, .OEX, .VIX, XME
Unusual Options Activity Review For Friday, February 10, 2012
Friday's Bullish Trading
Riverbed Technology (RVBD), a San Francisco, CA software and networking company, saw an inexplicable rise of call option activity Friday. Shares didn't do much ñ falling 6 cents to $27.67 on volume of 3.7 million, which is only about 70 percent there recent average daily share volume for the name. However, options volume was heavy. 22,000 calls and 3,150 puts traded in RVBD. Most of the action was in smaller lots. The top trade was 590 February 30 calls for 15 cents per contract. 3,750 traded. The contract is 8.4 percent OTM and expires at the end of next week. March 30, 31, 32, and 33 calls were busy as well and levels of implied volatility in RVBD were up 15 percent to 47. There was no news on the ticker Friday, but the name might be worth watching in the weeks ahead, as some players in the options market seemed to be buying calls in anticipation of a larger-than-typical short-term move in Riverbed Technology shares.
Bullish trading was also seen in Frontier Communications (FTR), Yahoo (YHOO), and Darden Restaurants (DRI).
Friday's Bearish Trading
Ctrip (CTRP), the Chinese online travel company, saw relative strength Friday. Shares gained 21 cents to $24.93. Meanwhile, options volume was 5.5X the daily average. 18,000 puts and 610 calls traded on the stock. The top trade was part of a spread, in which the investor apparently bought 5,000 March 24 puts for $1.50 and sold 5,000 March 20 puts at 25 cents. The same spread traded again for $1.25, 2000X. In fact, both contracts traded more than 8,000 on the day and the activity appears to be opening, or new positions in CTRP. If so, the bearish Mar 24 ñ 20 put spreads might have been initiated to help hedge stock. The max profit of the position happens if shares fall to $20 or less through the March expiration, which represents a 20 percent tumble over the next five weeks.
Bearish trading was also seen in Kroger (KR), Ventas (VTR), and Teradyne (TER).
Index Recap
Trading volumes picked up in the index market, as the S&P 500 Index (.SPX) lost .7 percent and suffered its biggest decline so far in 2012. 838,000 calls and 890,000 puts traded across the S&P 500, S&P 100 Index (.OEX) and other cash indexes, which is about 1.5X the recent daily average, according to Trade alert data. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected volatility priced into S&P 500 Index options, jumped 2.16 to 20.79 and gained 21.4 percent on the week. The volatility index is moving higher due partly to the concerns over the lack of agreement between Greece and its creditors. Frances CAC 40 Index paced the decline across Europe with a loss of 1.5 percent Friday. Yet, the decline on Wall Street was orderly. The S&P continues to trade quietly and has not suffered a daily loss in excess of 1 percent so far in 2012. Now, however, with VIX moving back beyond 20 and well above the actual volatility of the S&P (30 day is only 8.4 percent), the options market might be beginning to "price in" or discount the prospect of wider daily price swings in the S&P 500 in the weeks ahead.
Analyzing the ETF Market
Friday was a rough day for the metals and mining names. Stocks were falling across the sector after weak Chinese import data and falling metals prices weighed on the group. Gold lost $18 to $1723 and silver gave up 42 cents to $33.50. Meanwhile, SPDR Metals and Mining Fund (XME), which represents ownership in a basket of different names from related industries, lost $1.99 to $53.25. Options volume in the product rose to 3.5X the daily average. 33,000 puts and 14,000 calls traded in XME Friday. March 51 puts, which are 4.2 percent out-of-the-money and expiring in 5 weeks, were the most actives. 13,500 traded. Feb 53 and Jun 51 puts were busy as well. Some portfolio managers might have been taking positions in downside puts in XME to hedge recent gains in metals and mining names. XME was down today, but is up 9.7 percent year-to-date.
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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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