Option Block 101: Size Money vs. Smart Money
Option Block 101: Size Money vs. Smart Money\n
Trading Block: The market is off to the races...again. Strong rallies across the board. VIX cash finally makes its way down into the sub-30 range, welcome news for those who have been leaning to the downside in VIX. European leaders expand bailout fund - 50% write-down on Greek debt. Is the European debacle behind us? Strong economic data -- the economy grew at 2.5%, consumers strongest since Q4 2010. Also, a strong earnings season so far -- more than half of the companies in the S&P 500 have released quarterly results since Oct. 11, and about three- quarters have beaten the average analyst estimate, data compiled by Bloomberg show.
Odd Block: Unusual activity in:
Avon Products, Inc. (AVP) It\u2019s been a rough day for door-to-door cosmetic seller Avon Products, Inc. (AVP) with the company posting Q3 earnings this morning that missed estimates by 17% and announcing the SEC is investigating its contracts with financial analysts. The shares are currently trading 17% lower and are flirting with their 52 week low. Option volume is already 10 times the company\u2019s average daily activity with the most notable trading carrying a long term Bullish sentiment. The January \u201913 20 strike Calls have seen more than 6,000 contracts cross the tape and, with 85% of the trades taking place on the offers and little current open interest, it appears to be opening buyers looking for the stock to climb above the $22.20 price level during 2012.
MGIC Investment Corp. (MTG) A long term Bullish option player appears in private mortgage insurer MGIC Investment Corp. (MTG) this morning with the purchase of 82,500 January \u201913 10 Calls at $.45. This trade not only creates the largest contract position in all of MTG\u2019s listed option but also ranks as the highest volume option trade so far today. With a long delta of 32, this trade carry\u2019s a long share equivalence of more than 2.6 million shares and will need the stock to rally more than 300% over the next 14 months to reward this investor with any profits. Total option volume in MTG is currently more than 17 times its average daily contract activity.
HL \u2013 Hecla Mining Co. Shares in the mining company are up 7.5% to stand at $6.30 as of 1:40 pm EDT, on an up-up-and-away kind of day for U.S. equities. Hecla Mining Co. popped up on our \u2018hot by options volume\u2019 market scanner following a burst of activity in December contract calls. Options traders exchanged about 25,000 calls at the Dec. $6.0 strike this morning against open interest of 3,315 positions. It looks like most of these in-the-money calls were purchased for an average premium of $0.63 apiece. Shares in Hecla Mining last traded above $6.63 back on September 22.
Xpress Block: Tim Navabi runs down the recent activity at OX. Buy, buy, buy! Traders are getting long as sellers are exhausted and saying goodbye to the puts holders. Using a LEAP as a covered call swap out - the LEAP vs. the short term call. What happens to that LEAP if your front month option expires or is about to expire and the option is in the money?
Around the Block: An update that the Baidu (BIDU) earnings just came out and in the afterhours is trading, hovering around $1.50. Netflix trading in the 80 handle, creating widows left and right. Amazon down as well, closed today at about $2.07, was trading as high as $2.40 before earnings. MF Global hitting the 4 handle, a lot of activity in the Nov 01 puts - not a good sign.