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Bulls Bet on Best Buy Co., Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/18/2010 2:01:12 PM

Best Buy Co., Inc. (BBY) was the center of some brisk option activity Wednesday, with the retailer seeing volume soar to 34,000 -- nearly double the daily average. Option players showed a preference for calls, with 26,000 of these bullish bets changing hands.

The March 41 call received the most attention, with 10,410 contracts traded. Overnight, open interest at this strike swelled by 7,943, pointing to the addition of fresh positions. What's more, 60% traded at the ask price, implying a good portion of the contracts at this strike were bought to open. By buying to open the March 41 call, speculators are betting that BBY will muscle past the $41 level by March expiration -- which happens after the closing bell this Friday.

This optimism toward BBY is a bit of a change of pace, with the International Securities Exchange (ISE) reporting a 10-day put/call volume ratio of 1.66, in the 65th percentile. In other words, speculators on the ISE have been initiating puts at a faster rate than usual lately.

Elsewhere on the street, sentiment is evenly split toward BBY, with 13 analysts rating the equity a "buy" or better, and the other 13 calling BBY a "hold" or worse, according to Zacks.

Technically speaking, BBY has rallied nearly 9% since the start of March. At last check, BBY had gained .65%, to sit at $40.37.

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Put Traders Target Chesapeake Energy Corporation (CHK) on Bearish Brokerage Note

Andrea Kramer (akramer@sir-inc.com)

3/18/2010 1:40:27 PM

Lazard Capital this morning downgraded Chesapeake Energy Corporation (CHK) to "hold" from "buy," citing lower oil and natural gas forecasts for 2011. In light of the news, the shares of the commodities concern have surrendered about 4.6%, triggering a mad dash for put options on the stock.

So far today, CHK has seen roughly 24,000 puts cross the tape � nearly quadrupling its expected daily volume of about 6,500 contracts. The security's now-near-the-money April 23 put has seen almost 6,100 contracts exchanged � 40% of which have traded at the ask price, implying they were likely bought. However, with more than 18,500 puts already open at the soon-to-be front-month strike, we can't yet tell how much of today's activity will translate into fresh bearish positions.

Judging by the latest data from the International Securities Exchange (ISE), today's preference for CHK puts is a growing trend in the option pits. The stock's 10-day put/call volume ratio of 0.79 ranks in the 90th annual percentile, suggesting that speculators on the ISE have initiated bearish bets over bullish at a much faster pace than usual lately.

Further echoing the mounting pessimism, the equity's Schaeffer's put/call open interest ratio (SOIR) has skyrocketed in recent weeks. More specifically, the security's SOIR of 0.50 stands higher than 60% of all other readings taken during the past year, indicating that short-term option players are adding puts at a more rapid clip than calls.

At last check, CHK has given up about $1.10 to hover just south of the $24 level.

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Put Writers Predict Round-Number Support for Clean Energy Fuels Corp. (CLNE)

Andrea Kramer (akramer@sir-inc.com)

3/18/2010 11:48:49 AM

Put traders converged on Clean Energy Fuels Corp. (CLNE) on Wednesday, with single-session volume soaring to more than five times the norm. More specifically, the alternative energy issue saw close to 3,800 puts change hands yesterday, compared to its predicted daily volume of fewer than 750 contracts. However, digging deeper into the data reveals that not all of the activity was of the bearish variety.

The security's out-of-the-money April 20 put attracted the most attention, with roughly 3,275 contracts exchanged. Put open interest at the round-number strike advanced by more than 2,900 contracts overnight, pointing to the addition of fresh positions. However, the majority of the soon-to-be front-month puts traded closer to the bid price, suggesting they were likely sold.

By writing the April 20 puts, the sellers are betting the shares of CLNE will remain atop the $20 level through options expiration on Friday, April 16. In this instance, the 20-strike puts will expire worthless, allowing the sellers to keep the initial premium received � which also represents the maximum potential reward on the play.

While yesterday's bullish bettors may have taken the less conventional route, the latest data from the International Securities Exchange (ISE) further reflects a growing optimism among the options crowd. CLNE sports an ISE 10-day call/put volume ratio of 3.23, indicating that speculators during the past two weeks have bought to open more than three times as many CLNE calls as puts.

At midday, CLNE has added 3.2% to explore the $21.70 neighborhood.

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Near-Term Put Volume Heats Up on Evergreen Solar, Inc. (ESLR)

Andrea Kramer (akramer@sir-inc.com)

3/18/2010 11:28:29 AM

Option players are betting on more downside momentum for Evergreen Solar, Inc. (ESLR), as indicated by Wednesday's spike in single-session put activity. During the course of the session, the solar concern saw roughly 4,100 puts cross the tape � more than 13 times its expected daily volume of fewer than 350 puts, and almost 54 times the number of ESLR calls traded.

Nearly all of the action centered on the near-the-money April 1 put, which saw 4,000 contracts change hands. Virtually all of the soon-to-be front-month puts traded at the ask price, suggesting they were bought, and put open interest at the April 1 strike skyrocketed by exactly 4,000 contracts overnight, pointing to new positions. Or, simply put, it appears bearish traders are expecting ESLR to retreat south of the $1 level by April options expiration.

The preference for pessimistic positions is further reflected in the stock's Schaeffer's put/call open interest ratio (SOIR), which currently stands at an annual bearish peak of 1.17. In other words, not only do puts outnumber calls among near-term options, but short-term speculators haven't been more skeptically skewed toward ESLR at any other time during the past year.

Considering the latest data from the International Securities Exchange (ISE), it's no wonder the equity's SOIR is at a 52-week high. During the past two weeks, ESLR has racked up a lofty ISE put/call volume ratio of 182.65, which stands only one percentage point shy of its own bearish acme.

At last check, ESLR has retreated 0.8% to explore the $1.25 region.

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Put Players Shop Family Dollar Stores, Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/18/2010 10:37:30 AM

On Wednesday, Family Dollar Stores, Inc. (FDO) hit a new 52-week high of $35.96 on the New York Stock Exchange (NYSE). Option activity on FDO also soared on Wednesday, with option players hitting the discount retailer in force. Specifically, FDO saw volume of 11,000 contracts cross the tape -- over three times the expected daily volume of less than 3,000.

Put volume saw the sharpest increase Wednesday, with 5,397 of these bearish bets trading, five times FDO's usual put volume.

Option shoppers favored the April 35 put, which had volume of 4,662 contracts change hands -- 62% at the ask price, implying that they were bought. With open interest at this strike increasing by 3,660 contracts overnight, it appears a healthy chunk of these puts were bought to open. The April 35 put is now home to peak put open interest for the April series, with 5,217 contracts in residence.

By buying to open the April 35 put, these bearish speculators are betting on FDO to fall below the $35 level by April expiration.

Currently, the stock's Schaeffer's put/call open interest ratio (SOIR) stands at 1.75, implying that put open interest nearly doubles call open interest among options slated to expire within the next three months. What's more, this ratio ranks in the 90th annual percentile -- just 10 percentage points away from an annual bearish acme.

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Commentary by WhatsTrading.com

Citigroup Inc (C) $4.04 -0.25%

3/18/2010 12:20:03 PM

Huge Print in Citi (C) today after an investor sold 217,000 April 4 puts at an average of 16 cents per contract. Citi is flat at $4.05 and this appears to be a new position, as open interest is 189K. 266,500 Citigroup April 4 puts now traded.

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Human Genome Sciences Inc (HGSI) $31.50 +0.83%

3/18/2010 11:20:03 AM

Human Genome Sciences (HGSI) sees a spike on increasing volume and is up 49 cents to $31.73 on renewed takeover speculation -- fly on the wall. In the options, March 32 calls are seeing interest in recent trade. 3000 now changed hands vs. 2726 in open interest. 33 percent traded Mid and 51 percent at the Ask. (Note: with the expiration at the end of this week, there are plenty of reasons to be skeptical of any chatter today and tomorrow.)

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Boston Scientific Corp (BSX) $6.92 -0.43%

3/18/2010 10:20:04 AM

Boston Scientific (BSX) shares are down 4 cents to $6.91 and BSX puts seeing some interest early Thursday after the FDA recommends that doctors not use BSX medical devices. The FDA is not urging explants and is now aware of safety concerns, but advises against the use of devices until changes are approved. Recall that BSX shares fell 12.6 percent on March 15 after the company warned that it has stopped the sale of its defibrillators. Recent options trades today includes 1250 BSX Aug 6 puts at the 45-cent asking price and might be part of a protective put play. 2700 now traded.

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Unusual Activity Roundup, Mar 17

3/17/2010 4:20:03 PM

Some less actively traded names seeing bullish order flow: Texas Roadhouse (TXRH), Mueller Water Products (MWA), Granite Construction (GVA) Bearish order flow: VF Corp. (VFC), Embraer (ERJ), Knight Transportation (KNX) Post Earnings: General Mills (GIS) Pre-Earnings: Nike (NKE), FedEx (FDX) Ex-div.: Tiffany (TIF), Dr. Pepper (DPS), National Semi (NSM), Provident Energy (PVX), DTE, Holly (HOC)

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Alcoa Inc (AA) $14.76 +6.95%

3/17/2010 3:00:06 PM

Alcoa (AA) shares rallied nearly 7 percent to $14.75 and are easily the best gainers in the Dow Jones Industrial Average on reports the company might begin to get discounts on power supplies in Italy. Alcoa said in November that it would temporarily idle smelters in Sardinia and Venice. However, under a new decree Sardinia and Sicily would be upgrade and industrial consumers like Alcoa would get discounts on power supplies. AA is up and options volume is running 4X the average daily, with 171K contracts on the tape so far. April 15 calls are the most actives. The top trade is a block of 8000 on the bid of 47 cents and marked "tied", and so a possible buy-write. Also seeing buyers of Oct 15 and 20 calls. A seller of an April 15 - 17 call spread, 2000X. A buyer of July - Oct 15 call spread, 4000X. And, an April 13 - 15 "collar", 2800X.

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Crocs Inc (CROX) $7.92 +7.17%

3/17/2010 1:20:06 PM

Crocs (CROX) is up 52 cents to $7.91 and seeing relative strength after Piper Jaffray analysts upped their price target to $9 from $8.50. The analysts met with management and said they have increased confidence in growth strategies, leadership, and opportunities in global markets for the company. They recommend CROX. In the options market, volume is running about the typical levels, but with clearly more action on the call side of the options chain. 1475 contracts traded, compared to 66 puts. The action is focused on Mar 7, April 8, Mar 8 and Sep 8 calls, with about 75 percent trading at the asking price.

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Polycom Inc (PLCM) $33.01 +8.44%

3/17/2010 11:20:06 AM

Polycom (PLCM) gapped higher and is up $2.71 to $33.05 on 10X the average daily options volume after FT.com reported that Apax is in talks with the video game maker about going private. April 30 calls are the most actives, with 8815 traded. Some players might be exiting positions, as the contract is $3 in-the-money and was the subject of interest on Mar 11 and Mar 15 when shares were between $29 and $30. July 35 calls and April 30 puts are seeing interest as well.

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Materials Select Sector (XLB) $33.99 +0.65%

3/17/2010 10:20:06 AM

Select Sector Basic Materials (XLB) with a four way trade yesterday that looked a lot like an iron butterfly -- selling the June 32 straddle to buy the June 29 - 35 strangle, 10000X. However, looking at today's open interest, looks like the Jun 29 - 32 call risk-reversal was closed to open a position in the bullish June 32 - 35 risk-reversal (However, also possibly a roll of a strangle up in strikes.)\n
\n\nFlow Monitor Tip: You can see the open interest changes each morning using Flow Monitor. You'll get it here fast. In this example, enter XLB, then select option 5. To see more, enter + (you can do this several times.)

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Unusual Activity Roundup, Mar 16

3/16/2010 4:20:03 PM

Some less actively traded names seeing bullish order flow: Steelcase (SLT), Crown Castle (CCI), Jones Apparel (JNY) Bearish order flow: Werner Enterprises (WERN), Tibco Software (TIBX), Momenta Pharm (MNTA) Post Earnings: Sequenom (SQNM), Ariad Pharm (ARIA), AthenaHealth (ATHN) Pre-Earnings: Discover Financial (DFS), Khongzong (KONG) Ex-div.: HSBC (HBC), Chubb (CB)

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General Electric Company (GE) $17.99 +4.05%

3/16/2010 3:20:04 PM

GE, which saw more than 68,500 Mar 17.5 calls traded yesterday, is up 63 cents to $17.92 today and heading to session highs after the Fed stood pat on rates and said it expects rates to stay low for quite some time. GE shares were already higher ahead of the announcement after the company said it expects to make profits and increase its dividend in 2011.\n
\nIn the options market, trading remains brisk with another 281000 calls and 119000 puts on the tape so far. March 17.5 calls are agiain the most actives, with another 66.2K traded and some closing trades likely driving the action, as open interest is 174K and still the largest of any GE options contact. Some investors are likely rolling to the April 18, April 19, and June 18 calls on hopes the stock can continue its running to new 52-week highs.\n
\nClick here for yesterday's comment on GE, which included signs of call buyers in morning action. We monitor the options order flow throughout the day and post free updates at WhatsTrading.com. Please see our info on Premium (to your right) if you'd like continuous updates like this throughout the trading day, as well as other tools to find options trading ideas, information, and education.

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More Options Commentaries and Observations by Schaeffer�s

Checking Out Massive Call Volume on Citigroup Inc., By the Numbers

Citigroup Inc. (C) has been bombarded with heavy option activity lately, ever since reports hit the Street earlier this month that the government may be looking to sell its stake in the bailed-out bank. Given our insatiable curiosity regarding unusual option volume, it seemed only fitting that we take a closer look at this tainted titan of finance.

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Options Update: A Long Put Butterfly on Dendreon Corporation (DNDN)

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Option Activity Alert: Bullish Speculation Swells on Lincoln National Corporation

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Option Players' Pessimism Abates as Zions Bancorporation (ZION) Zips Higher

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