Unusual Options Activity Review: BAC, DISH, SLB, SWHC, WNR, LCC, PKX, CSC, .SPX, .VIX, XLB, XME, XOP

Posted March 23rd, 2012 by Joseph Cusick in Unusual Activity

Unusual Options Activity Review For Thursday, March 22, 2012

Thursday's Bullish Trading
Bank of America (BAC) lost 2.2 percent to $9.60 and is one of the biggest losers in the Dow Jones Industrial Average. Trading in the options on the bank was brisk. About 683,000 calls and 187,000 puts have traded on the stock Thursday. June 11 and 12 calls are the most actives, as more than 125,000 contracts traded in both call options. Some of the flow is due to spread trading. For example, in afternoon action, one investor apparently bought 20,000 Jun 11 calls on BAC for 30 cents per contract and sold 20,000 Jun 12 calls at 15 cents. The spread, for a 15-cent net debit, appears to be a view that shares may move beyond $11 through the June expiration, which represents a 14.6 percent advance from current levels. BofA has already rallied more than 90 percent from the lows seen in December.

Bullish trading was also seen in Dish Networks (DISH), Schlumberger (SLB), and Smith and Wesson (SWHC).

Thursday's Bearish Trading
Western Refining (WNR) traded down and put volume was up as a decline in crude oil prices seemed to weigh on a number of energy-related names Thursday. WNR is off 46 cents to $19.00 in afternoon action and options volume on the refiner includes 4,900 puts and 610 calls. June 22 puts, which are already $3 in-the-money, are the most actives. 3,020 traded against zero contracts in open interest. The activity has been in smaller sizes. The top trade is an 84-lot for $2.74 per contract. May 19 puts on WNR, which are now at-the-money, are seeing interest as well and levels of implied volatility rose 7 percent to 40. Some investors might be hedging shares with at-the-money and in-the-money WNR puts after a gain of more than 70 percent in the share price since late-November.

Bearish trading was also seen in US Airways (LCC), Posco (PKX), and Computer Sciences (CSC).

Index Recap
Volume in the options market was light Thursday, but the uptick in volatility seems to have stirred up a modest amount of hedging activity. 329,000 calls and 644,000 puts have traded across the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX), and other cash indexes; which is only about 79 percent the expected volume, according to Trade Alert data. The S&P 500 is down 9.25 points to 1,293.64 and the top index options trade of the day is a 12000-contract block of SPX April 1300 puts for $4 per contract, which is possibly a deep out-of-the-money put buyer turning to S&P 500 puts to help hedge a stock portfolio.

Analyzing the ETF Market
Large blocks of puts traded on a handful of economically-sensitive exchange-traded funds Thursday morning. For example, SPDR Basic Materials (XLB) gave up 57 cents to $36.55 and morning trades on the ETF included a 16,100-contract block of Apr 35 puts traded for 36 cents. SPDR Metals and Mining ETF (XME) is off $1.49 to $49.29 and 19,030 April 43 puts traded for 39 cents per contract. SPDR Oil and Production Fund (XOP) slipped $1.91 to $57.60 and 18,900 April 50 puts traded for 33 cents each. All three blocks traded on the International Securities Exchange, where data indicate all three blocks of puts were bought-to-open. A large institutional investor possibly initiated the trades to help hedge a larger stock portfolio through April.

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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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