Unusual Options Activity Review: T, OC, ONNN, CIE, GMCR, MUR, NTRI, CTL, .SPX, .OEX, .BJZ, .XOI, UNG

Posted May 3rd, 2012 by Joseph Cusick in Unusual Activity

Unusual Options Activity Review For Wednesday, May 2, 2012

Wednesday's Bullish Trading
AT&T (T) lost 2 cents to $33.04 and snapped a six-day 8 percent winning streak. The stock has been in rally mode since earnings were reported on April 24 and has been setting a series of new multi-year highs along the way. The stock dipped a bit Wednesday and a noteworthy options trade in AT&T was a spread, in which the investor sold 15,300 July 32 calls on the stock at $1.44 and bought 15,300 July 34 calls for 37 cents per contract. This hefty Jul 32 ñ 34 call spread, for a $1.07 net credit, traded on the International Securities Exchange. Data from the exchange indicate that the July 32 calls were sold to close and the July 34s bought to open. July 32 calls are now in-the-money after the recent rally in shares. Looking at the history of the contract, there was a 15,000-contract block bought for 55 cents in January. The stock is up about 10 percent since that time, and the strategist might be exiting the trade for a potential profit. However, they are also opening a new position in the July 34s, which might reflect confidence that the stock's recent run higher can continue through mid-July.

Bullish trading was also seen in Owen's Corning (OC), ON Semiconductor (ONNN), and Cobalt International Energy (CIE).

Wednesday's Bearish Trading
Options on Green Mountain Coffee Roasters (GMCR) were heavily traded in front of earnings. The stock saw a relatively quiet session and lost just 22 cents to $49.52. Meanwhile, options volume was 5.5X the daily average. 76,000 puts and 63,000 calls traded in GMCR. One of the largest trades was a block of 2,500 May 55 puts for $8.05 per contract on ISE. The hefty premium purchase, worth more than $2 million, was an opening buyer, according to ISEE data. GMCR is trading down 35 percent in extended hours after reporting so-so earnings and lowering guidance for the next quarter.

Bearish trading was also seen in Murphy Oil (MUR), Nutrisystems (NTRI), and CenturyLink (CTL).

Index Recap
It was another quiet trading day in the index market Wednesday, with 487,000 calls and 513,000 puts traded on the S&P 500 Index (.SPX), the S&P 100 Index (.OEX), and other cash indexes; which is only about 83 percent the average daily volume, according to Trade Alert data. An index that did see an uptick in volume is the NYSE-ARCA Mini Oil Index (.BJZ). The index is pint-sized version of the NYSE-ARCA Oil Index (.XOI), which is one of the oldest sector indexes and tracks the share price action of leading oil companies. BJZ is designed to equal 1/20th of XOI. So, while the big index lost 17.52 points to 1,236.34, the smaller index slipped .87 to 61.81 One player in the options market seems to be anticipating further weakness in the major oil names and was apparently buying May 62.5 puts on BJZ Wednesday. 1,375 contracts traded, all in small lots of 25 contracts traded at or near the offer.

Analyzing the ETF Market
US Natural Gas Fund (UNG) shares were under pressure Wednesday afternoon on reports a natural gas fund manager John Arnold was shutting down a natural gas fund. UNG saw an afternoon slide and lost 72 cents to $16.18 on the day. Options on the ETF were actively traded, with 21,000 calls and 34,000 puts traded. The largest trades surfaced in morning action after an investor bought 4,000 October 19 calls on the ETF for $1.50 per contract and sold 4,000 October 17 puts at $2.56. The risk-reversal traded on ISE and data confirm that puts were sold to buy calls for a $1.06 net debit and does not seem to be well-timed so far. Shares fell from $16.80 when the trade was initiated to $16.18 at the close, or a decline of 3.7 percent.

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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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