Today’s tickers: VIX, AAPL, C, FCX, USU, SNPS, MVSN & BGP
VIX – CBOE VIX index – The bears refuse to go into hibernation as far as trading goes in the volatility index. The fear-gauge slipped below the 20 level for the first time in five weeks as investors sent the benchmarks indexes sharply higher on Thursday and the VIX is just clinging above 20 in Friday’s session. Some die-hards appear to keep buying volatility in the soon-to-expire December contract, while the January contract at the 27.5 and 32.5 strikes is largely being sold. Further down the strip we noted an interesting “free” trade. In the May contract it appears that a ratio call spread was placed. Some 5,000 May 20 calls were bought at 4.80 while 10,000 calls were sold at the 27.5 strike at around 2.40. In this case the trader is opening a 7.5-point window for the VIX but is using the premium credit from the sale of twice as many calls at the upper strike to pay for the trade. Of course there’s nothing in life that’s “free” and while this investor might be on to something here, should volatility surge as high as 35, the trade starts to lose money. It’s probably quite an astute volatility play given the recent failure of the index to breach 30 when the chips appeared to be down for the economy and corporate America.
AAPL – Apple Computer Inc. Option traders can’t keep away from the calls today. The share price has rebounded following an earlier decline at the maker of iPhones. Shares rose in price to $191.74 but option buyers lifted almost twice as many calls as they did puts. In the January contract the 200 calls remained active today with premiums trading at 9.0 indicating a breakeven of $209 at expiration.
C - Citigroup Inc. With a flat share price today, we’ve noticed a weight of bearish put action on the bank today, as investors make two put trades for each call option. Volume at 106,000 is decent on Citi and the action seems to be apparent in the January contract where what might be a put spread involving 7,000 puts at each of the 35 and 32.5 strike have appeared on the tape. Some 3,400 30 strike puts have also traded with shares in the bank trading at $34.24. In the January 2009 series, the 30 puts were bought 4,000 times at 3.50 while the higher 32.50 strike was sold 2,000 times at 4.20.
FCX – Freeport McMoRan shares rose 3.5% to $108.52 prompting a bullish bias to option activity. Two calls were put in play for each put on volume of 63,000 contracts. In the January series the 105 through 115 strikes were well bought, while 1,000 lots in the February 120 calls also traded at premiums as high as 5.15 for a 35% increase on Thursday’s closing price.
USU - USEC Inc. - Relatively heavy options volume was noted early Friday on USEX Inc., which provides low enriched uranium to nuclear power plants. Overall volume of 24,696 contracts have traded today with a definite bias to the call side.
