Options Wrap: Bullish for Long-Term Gain
Activision Blizzard, quirky VIX options, and Fifth Third Bancorp.
Activision Blizzard Bulls Eye Longer-Term Gains
Activision Blizzard, Inc. (NASDAQ:ATVI) has seen a recent influx of call activity, according to data pulled from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Traders on these exchanges have bought to open 641 calls for every 100 puts during the last two weeks. This 10-day call/put volume ratio of 6.41 is docked in the 55th annual percentile, reflecting a slightly healthier-than-usual appetite for calls over puts.
This bullish trend has carried over into today's session as well. Roughly 20,000 calls have crossed the tape as of 2:15 p.m. EST, which is almost nine times the security's expected intraday call volume. By contrast, about 2,300 puts have been exchanged. The May 12 call has received the most attention, with nearly 10,400 contracts trading at a volume-weighted average price (VWAP) of $0.36. Almost all of these calls changed hands at the ask price, suggesting they were bought. Read more...
Know Your Contract Specs: VIX Options Come With Quirks
Today was the December expiration day for options based on the VIX (^VIX). Let’s jump right into the deep end with this query from a reader regarding said VIX options.
I am following the VXX (NYSEARCA:VXX) trade [recommended in OptionSmith newsletter, subscription required], but not exactly. I sold a December $18 VIX put and was just curious to know what will happen if I don't exit the trade by expiration. It doesn't seem to be like other options where you will be required to purchase the underlying stock at the strike price.
The VIX and its related products come with a whole host of idiosyncrasies in terms of pricing behavior, but that is (and has been) the topic for another column (see It's Time to Buy Volatility).
Let’s just keep the focus on the mechanics of VIX options and how to trade them because they do come with some quirks, such as a special opening settlement price (which I will get to below). Basically, we want to know everything, from which contracts are currently available and what the strike prices are, to the multiplier, to expiration dates and settlement procedure -- right down to what the trading hours are when the market is open. Read more...
Bullish Traders Target Fifth Third's January Options
Fifth Third Bancorp (NASDAQ:FITB) has seen a staggering spike in bullish trading activity today, as roughly 23,000 calls have traded so far. This is nearly 39 times the norm, and more than four times the number of puts traded. The clear front-runner has been the January 2013 14 call, where more than 12,600 contracts have crossed the tape -- the majority of them at the ask price, suggesting they were bought. Digging deeper into the data, it looks as though these calls changed hands at a volume-weighted average price (VWAP) of $0.99.
Meanwhile, today's volume exceeds current open interest levels, while implied volatility was last seen 4.5 percentage points higher -- both of which indicate the initiation of newly opened positions. By purchasing these calls to open, speculators are expecting the shares to rise north of $14.99 (strike price plus the VWAP) by January expiration -- just a stone's throw away from current levels. Read more...
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