CHK – Shares of
Chesapeake Energy Corp eked out a
modest .72% advance to $37.98 today, possibly gaining tailwind from
news that its chairman and CEO purchased nearly $7 million worth of the
company’s stock over the past week. Oklahoma-based Chesapeake is the
largest independent producer of natural gas in the United States. The
move looks to have galvanized option traders to put the equivalent of
some 11% of its open interest into active trading, virtually all of it
in the April contract, and much of it contrarian in nature. April puts
were bought at strikes of 35, 37.50 and 30, while traders may have
looked to take profit in calls in the same month at strikes of 37.50
and 40.
CSX
– Transportation sector tickers have been a conspicuous favorite of
option traders throughout Monday’s session. In addition to the elevated
level of interest in Union Pacific (see below),
options in North American railroad operator CSX rated among the 20 most
active option families on our platform today. With shares down 1.8% at
$49.04, the 38,000-plus options in play this afternoon traded 3 times
as often to calls as to puts – representing the highest level of
call-side activity in CSX in nearly a month. Some of this may have been
due to profit-taking in January ‘09 $60 calls, which traded to the
middle of the market for $3.50. We think this may be the closing sale
of positions opened on January 10 for $1.62 when CSX shares were nearly
$6 cheaper, making those out-of-the-money calls a little less dear.
Closing the position today would reap the January buyer a 116% profit
margin. In the front month, meanwhile, calls at the 50 strike traded
actively to the middle of the market at around $1.20 – open interest at
this strike having doubled over the past week.
ACLI – Options in American Commercial Lines,
the diversified marine transportation and shipbuilding enterprise,
registered nearly 8 times the normal level of volume today. Shares in
the company slid 4% to $18.53 after an analyst downgrade claimed the
stock price was overvalued given its profit outlook. ACLI currently
trades at 17 times its earnings – its next quarterly report is due out
on Wednesday. The drop in share price elicited fresh positioning in
calls at the $20 strike in the September and January contracts,
however, which would seem to suggest that the downgrade hasn’t left
traders begging off the upside. While its shares are up more than 14%
for the year to date, the number of open call positions dwarfs that of
puts by a factor of 6.6.
VIX – Today’s pullback in major indices after four days of gains sent the Volatility Index
up 8% to 25.92. With most of today’s option volume in February calls at
strikes of 25 and above, it’s clear that the watermark for volatility
remains elevated, but we’d add the proviso that much of this volume is
trading to the middle of the market, within already large pools of open
interest, and with call-side premiums slightly higher. This would
suggest that some players may be taking volatility-bullish positions
off the board in anticipation of further relaxation in the volatility
outlook. We also observed traders sell calls at the March 27.50 line,
possibly looking to fund the purchase of puts at the same strike for
$4.30.
COF
– A UBS analyst downgrade of major credit card companies, citing
increased credit losses emanating from a consumer-led recession, hit
hard at card issuers such as American Express, Discover Financial
Services and Capital One Financial Corp.
