Large options trades can provide clues to make market moves, notes Jay Soloff....
Increased Option Activity in Three Stocks
03/02/2010 12:01 am EST
Comcast Corp. (CMCSA)
By 10:35 am EST yesterday, Comcast Corp. (CMCSA) options received a big boost thanks to a potential LEAPS put seller calling for limited downside. The CMCSA January 2012 12.5 puts have hit the tape more than 12,500 times, and it looks like investors sold these options for $1.21 per contract, just a few cents higher than the bid price of $1.18.
Investors who sold these puts will make money if CMCSA shares close higher than $11.29 at January 2012 options expiration. The January 2012 12.5 puts have an implied volatility of 35%. The puts have dropped seven cents so far on the day.
CMCSA shares have rallied 2%, or 33 cents, to $16.77 so far today. This means that if CMCSA shares do not experience more than 32% of downside throughout the next couple years, investors will turn profits on this longer-dated put sale.
OmniVision Technologies (OVTI)
More than 4,000 OmniVision Technologies Inc. (OVTI) April 15 puts crossed the tape yesterday morning, and it looks like investors could be bearish on the semiconductor image-devices producer. At 9:41 am EST, a couple blocks of these options crossed the tape for $1, or just a nickel below the ask price. Investors who bought these puts need OVTI shares to close lower than $14 at April options expiration to make money.
These puts are home to current open interest of 25 contracts, indicating investors traded them to open. Additionally, the April 15 puts have a 50 delta with the stock currently up 20 cents. This means the puts should have dropped around ten cents so far during today’s session, but the buying action has pushed the price of the puts up by eight cents more than they should be (the options are currently trading down two cents).
American International Group (AIG)
American International Group (AIG) saw front-month call volume heat up out of the gate this morning. At 9:40 am EST, a large block of roughly 5,500 March 35 calls hit the tape for 13 cents, or a penny higher than the bid price. This action suggests an investor likely sold these calls and bet on limited near-term upside.
Implied volatility of these calls, which have climbed two cents so far on the day, is currently 79%.
Before the opening bell yesterday morning, AIG announced a definitive agreement to sell its AIA Group, a pan-Asian life insurance company, to Prudential (PUK) for roughly $35.5 billion. In addition, Societe Generale upgraded AIG to buy from hold. As a result, the company’s stock climbed $2.32, or nearly 10%, to $27.09 in early trading.
By Karla Yeh, contributor, ONN.tv
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