Unusual Options Activity Review: BAC, BA, GPS, YELP, BIIB, PETM, VIAB, HTZ, .SPX, .VIX, .VXD, .RVX, .OVX

Unusual Options Activity Review for Thursday, March 7, 2013

Thursday’s Bullish Trading
Bank of America (BAC) saw a flurry of options activity. The stock was up 34 cents to $12.26, the best percentage gainer in the Dow Jones Industrial Average Thursday, on heavy turnover of 204 million shares. Meanwhile, options volume approached one million contracts, as 621,000 calls and 327,000 puts traded in the bank. We haven’t seen that kind of options volume in Bank of America since March of last year. March, April and Weekly (expiring 3/8) calls at the 12 strike were the most actives. The increased activity comes ahead of bank stress test results, that was due out Thursday afternoon.

Bullish trading was also seen in Boeing (BA), Gap Stores (GPS), and YELP.


Thursday’s Bearish Trading
Biogen Idec (BIIB) dropped 98 cents to $171.47 and has been easing off the 52-week highs of $173.72 seen earlier this week, after surging nearly 20 percent since January 15. While share volume was a relatively light 872,000, options volume on the biotechnology company was 3X the daily average. 6,850 puts and 550 calls traded on the stock, a ratio of 12-to-1. The activity was scattered across a number of different strikes. April 165, 160 and 155 puts were the most actives. Meanwhile, 30-day implied volatility in the options was up 13.5 percent to 30.0. There wasn’t any obvious news on the stock to explain the increased interest in puts on BIIB. Some investors were possibly taking positions against shares to help protect or hedge the big recent gains in BIIB over the past two months.

Bearish trading was also seen in Petsmart (PETM), Viacom (VIAB), and Hertz (HTZ).


Index Recap
It was a second very quiet day in both the equity and the options markets Thursday. After trading in a narrow 7-point range Wednesday, the SP 500 Index (.SPX) traded in a 4-point range and added 2.80 points to 1,544.26. Meanwhile, CBOE Volatility Index (.VIX), the index that tracks implied volatility priced into SPX options, dropped .47 to 13.06 and has now lost 15.8 percent in the past week. Indeed, implied volatility was broadly lower across the options market Thursday. Dow Jones Volatility Index (.VXD) was off .40 to 12.04, implied volatility in the small caps, as measured by .RVX, lost .41 to 16.14, and implied volatility on oil (.OVX) dropped 1.23 to 21.29.


Analyzing the ETF Market
Options on the iShares Silver Fund (SLV) were busy Thursday. Shares, which represent ownership in the actual physical commodity, were down 19 cents to $27.91 and the focus was on January 40 calls on the ETF. One investor bought a hefty 15,000-contract block for 32 cents per contract, according to a source on the exchange floor. At the end of the day, 56,570 contracts traded. The same calls saw interest Wednesday as well. The activity created 14,590 in new open interest. There now exists 66,959 of total open interest in the strike. If Thursday’s flurry adds to the open interest (check the chain Friday), it will represent the largest block of OI in the silver fund. If so, it seems to be aggressive trading in SLV, because $40 calls on the ETF are 43.3 percent out-of-the-money.



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