Unusual Options Activity Review
Monday's Bullish Trading
Chipotle Mexican Grill (CMG) saw a lot of activity Monday. The stock gained $6.46 to $332.81 in heavy trading of 1.5 million shares. By way of comparison, typical volume in CMG is about 625,000 shares. The stock lost 21.5 percent on July 20 in the wake of its most recent earnings report and was languishing near 52-week lows before Wednesday. Since then, CMG has been on a four-day 16.4 percent tear and the move continued Monday on high volume. Players in the options market have taken notice as well. 23,000 calls and 14,000 puts traded on the restaurant chain operator, which is 3X the daily average options volume for Chipotle. Weekly 340 and 350 calls, which are out-of-the-money and expiring after 9/14, were the most actives. More than 2,000 traded in both contracts. Sep 350, Oct 355, and Sep 340 upside calls were the next most actives in CMG Monday.
Bullish trading was also seen in TIVO, Alcoa (AA), and Owens Illinois (OI).
Monday's Bearish Trading
Apollo Group (APOL) came under fire and lost $2.26 to $28.03 Monday on increasing volume of 3.3 million shares. At the same time, options volume was 5X the daily average and very lopsided, as about 13,000 puts and 1,400 calls traded on the for-profit education company. Weekly 29 puts, which expire in four days, were the most actives in APOL. 3,640 contracts changed hands. Another 3,165 on the Weekly 28.5 puts changed hands. October 24, September 29, and September 27 puts were also among the most actives on the stock and implied volatility was up 16 percent to 50. It's not clear what was motivating the high options volume and drop in the stock, as there were no obvious company specific headlines on Apollo Group Monday.
Bearish trading was also seen in Garmin (GRMN), LeapFrog (LF), and Cirrus Logic (CRUS).
Options on the CBOE Volatility Index (.VIX) were actively traded Monday. The index hit a morning low of 14.27, but then saw an impressive late-day spike and finished up 1.90 points to 16.28. On the options front, 494,000 calls and 98,000 puts traded in the VIX pit. More than 93,000 October 35 calls traded on the index, making it the most actively traded options contract on the day. VIX October 30 calls were Monday's second most actively options contract after 92,700 contracts traded on the session. Some of the volume was due to spread trading, in which the October 30 calls were being bought and October 35 calls being sold. Today's Oct 30 – 35 call spreads appear to be bullish plays on VIX and to also reflect concerns about a potential uptick in market volatility heading into the historically volatile month of October.
Analyzing the ETF Market
ProShares UltraShort Euro (EUO) saw increasing options activity. Shares, which are designed to move twice the inverse of the EUR/USD currency pair, added 16 cents to $20.44 after the euro gave back .4 percent to 1.260 against the buck. Prior to Monday, EUO had suffered a two-day 3.5 percent dip because the euro had been weakening against the dollar. In options action, investors were showing interest in EUO call options. 7,795 contracts traded, vs. just 400 puts. September and October 20 calls were the most actives on the inverse euro fund Monday. Some investors are possibly buying calls on EUO as a way to trade against the European currency. In other words, they don't expect the recent rebound in EUR/USD to last. Important Information: Inverse ETFs are designed to achieve their investment objective on a daily basis are not designed to track the underlying index or benchmark over a longer period of time. Inverse and leveraged ETFs that are reset daily are unsuitable for investors who plan to hold these products for longer than one trading session. Over longer periods of time, leveraged and inverse ETF performance can differ significantly from their daily objective due to the effects of compounding.
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