Unusual Options Activity Review: CS, GLW, KGC, TSN, DECK, GMXR, HRB, YHOO, .SPX, .OEX, .VIX, KRE
Unusual Options Activity Review For Wednesday, March 7, 2012
Wednesday's Bullish Trading
Credit Suisse (CS) gained 60 cents, or 2.4 percent, to $25.95 and recovered some of the 7.3 percent slide suffered during the first two trading days this week. CS, like many of the other European banks, has been under pressure lately on concerns about the unfolding Eurozone debt crisis and worries about bank exposure to troubled debt. Wednesday, however, shares of the Swiss bank were trading higher and options volume increased to 2.5X the daily average. 8,750 calls and 835 puts traded on Credit Suisse Wednesday, a ratio of more than ten-to-one. April 27 calls were the most actives. 5,200 traded. Another 2,600 June 29 calls changed hands. Some investors might have a bullish view on the bank over the longer-term, but rather than buying shares outright in volatile markets, some might be buying calls that lock in the right to buy shares at a predetermined price (strike price) through the expiration date.
Bullish trading was also seen in Corning (GLW), Kinross Gold (KGC), and Tyson Foods (TSN).
Wednesday's Bearish Trading
Deckers Outdoor Products (DECK) shares sank to new 52-week lows and gave up $7.33 to $67.53 Wednesday after an SEC filing indicated that corporate executives, including the company's Chief, have been selling shares lately. Investors hit the deck on the news and options volume in the stock rose to 4X the daily average. 29,000 puts and 15,000 calls traded on Decker Outdoor Wednesday. March 65, April 65 and April 70 puts were the most actives, as some investors were likely buying puts on concerns about further short-term weakness in the underlying. DECK is already down over 25 percent since earnings were reported on 2/23.
Bearish trading was also seen in GMX Resources (GMXR), H&R Block (HRB), and Yahoo (YHOO).
Volume in the options market slowed from the relatively high levels seen the day before. For example, 452,000 calls and 651,000 puts traded on the S&P 500 Index (.SPX), the S&P 100 Index (.OEX) and other cash index products Wednesday, which represents a roughly 25 percent decline from the volume seen Tuesday, according to Trade Alert data. The S&P 500 gained 9.27 points to 1,352.63 and retraced (or recovered) 44.2 percent of the 20.97-point loss from the day before. Meanwhile, CBOE Volatility Index (.VIX), which tracks the expected or implied volatility priced into S&P 500 Index options, jumped 2.92 to 20.87 Tuesday and gave back 1.80 points to 19.07 Wednesday. Lighter volume in the index market along with a decline VIX suggest that the relatively high levels of anxiety that surfaced Tuesday eased somewhat Wednesday. Of course, that can change again based on the headlines in the days ahead, which includes key jobs data Friday and an FOMC rate meeting Tuesday.
Analyzing the ETF Market
SPDR Regional Banking Fund (KRE) gained 42 cents to $26.36 and options volume on the ETF hit 5X the daily average, being driven by a three-way spread. In morning trading, an investor sold 10,000 March 26 puts on the ETF at 44 cents per contract, bought 10,000 April 26 puts for 94 cents, and sold 10,000 April 23 puts at 21 cents. The three-way spread, for a 29-cent debit, appears to roll a bearish position or hedge. That is, the strategist might have been selling to close the March 26 puts, which are now 36 cents out-of-the-money and expire at the end of next week, while opening a new position in the April 23 ñ 26 put spread for 73 cents. April options expire in six and a half weeks.
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