Unusual Options Activity Review: DAL, GPS, OVTI, M, FB, CNX, BID, JRCC, .SPX, .VIX, FXE
Unusual Options Activity Review For Tuesday, May 29, 2012
Tuesday's Bullish Trading
Delta (DAL) shares are soaring to 52-week highs. The stock is on a four-day 11.8 percent winning streak and has skyrocketed nearly 45 percent so far in 2012. DAL added 43 cents to $11.80 in active trading of 17 million shares Tuesday. Options on the airliner are busy as well. 44,000 calls and 23,000 puts, which is 7X the daily average. The top trades were part of a spread, in which the investor was selling 11,500 September 9 puts and 5,800 September 10 puts to buy 17,000 September 12 calls and 20,000 June 12 calls on the stock. In terms of the Greeks, the delta on this four-way spread is net positive, as it appears that the investor is a willing buyer if shares fall back to $9 or $10 (strikes of the puts), but is also taking positions in $12 June and September calls to position for another possible run higher in the stock.
Bullish trading was also seen in Gap Stores (GPS), Omnivision Technology (OVTI), and Macy's (M).
Tuesday's Bearish Trading
Tuesday was a wild first day of trading for Facebook (FB) options. More than 320,000 contracts changed hands and the projected volume for the day is almost 400,000. The surge in activity is a record for the first day of options trading in a stock, according to Trade Alert data. The volume includes 140,000 calls and 182,000 puts. June 30 puts, which traded more than 23,700 contracts, are the most actives. The stock closed down $3.07 to $28.84 and some investors might be buying short-term puts to hedge the risk of additional losses in FB shares. June 32 and 34 calls are the next most actives. People are perhaps active in the upside calls in FB as a way to participate if the stock rebounds in the weeks ahead. Rather than buying shares outright today, they are potentially taking positions in options that give the right to buy (or call) the stock at a specific price (strike) for a predetermined period of time (expiration).
Bearish trading was also seen in Console Energy (CNX), Sotheby's (BID), and James River Coal (JRCC).
It was a light volume day in the options market, as players are waiting for key economic data this week, but most of the important numbers are slated for Thursday and Friday. 472,000 calls and 537,000 puts traded across the S&P 500 Index (.SPX) , CBOE Volatility Index (.VIX), and other cash index products, which is only 75 percent of the recent daily average, according to Trade Alert data. The S&P is up 13 points to 1,330.82 and VIX, which tracks the expected volatility priced into S&P 500 options, is down 58 to 21.18 and heading to session lows. However, some investors are possibly anticipating increasing volatility in the near-term, as VIX June 40, June 30, and August 37.5 calls are the most actively traded index contracts Tuesday.
Analyzing the ETF Market
CurrencyShares Euro Trust (FXE) is down 19 cents to $124.29 on a rough day for the euro. The European currency is falling below 1.25 against the dollar and is near Monday's two ñyear lows of 1.254 after Egan Jones downgraded Spain's credit rating to BB- from B. The euro remains under pressure and FXE, which is designed to equal roughly 100X the EUR/USD pair, is falling as well. Options on the ETF are busy. 11,000 calls and 35,000 puts so far, which is more than double the daily average for FXE. June 127 and July 122 puts are the most actives in the product.
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