Unusual Options Activity (April 28, 2007)

It wasn’t all that long ago that we were dicussing the implosion of the CBOE Volatility Index (the VIX) as it was trying to suck its way to under 10.0 for the first time since the mid-1990’s.  We had our mini-meltdown in the market shortly after that and the beloved "fear index" got closer to 20.0 and even got above it on intraday readings.  This now seens to have settled into a range of 12.0 to 14.0, which still makes options affordable for hedgers and speculators alike. 

We always like to see which stock options show strange activity, because it is usually in reaction to news or (better yet) a glimpse into speculators’ minds about potential events.  Here is a brief look at a portion of this Friday’s unusual options:

General Electric (GE) saw the most active options on Friday in the MAY07 $37.50 Calls, which can’t be all that surprising after Citigroup launched what may be sheer fantasy analysis to derive a $45.00 target if GE were to partially split itself apart.

Amazon saw 33,955 contracts trade of its MAY07 $60 Puts trade; probably all the overvalued comments and "ran too much" after Bezos and crew made every critic look like weasels.

Goodyear Tire (GT) saw 25,767 contracts of its JUL07 $30 Calls trade. Hmmm, not usually an options "most active" name. 

Tyco (TYC) saw 24,900 of its JULY07 $27.50 Calls trade, which is obviously someone getting ready for the imminent split into three.  Tyco is about to become TRI-CO.

Omnicare (OCR) traded 24,000+ contracts in the SEP07 $35 Puts trade.  This one is screaming toward a new yearly low after missing profits and guiding lower.  Omnicare also saw other contracts showing much more volume than "almost ever."

Eastman Kodak (EK) is one of the more interesting plays after 20,000 contracts traded in the JAN09 $30 Calls.  This one has been the beneficiary of rumors circulating earlier in the week that ‘someone somewhere’ may want to acquire the company.

Antigenics (AGEN) saw 1,164 of its JAN08 $5 Puts trade, which is very odd for a company like this.  We’ll have to go back to the drawing board and do some digging a) to verify if that number is correct, and b) to look at the open interest in teh Puts and Calls out in JAN08 because it seems high for a low priced biotech with a $150 million market cap and no revenues.

Microsoft (MSFT) still holds the poll position in open interest of "stocks" with the JAN08 $30 Calls having some 345,588 contracts in the open interest.  After the last earnings number, that may even be higher after the 33,000+ contracts that traded.

Lastly, where would we be if we ignored the beloved Dendreon (DNDN) as the king of near-dated options speculations.
Jon C. Ogg
April 28, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.