Unusual Options Patterns For What Lies Ahead (AA, BRCD, HAL, VVUS, UNG, SIRI)

We have scanned the options trades for highly unusual options trading patterns from Friday to see which will be carryover issues into next week.  Some may seem logical, while some may seem odd.  Friday’s highly unusual options trading that will carry over into next week was seen in Alcoa, Inc. (NYSE: AA), Brocade Communications Systems, Inc. (NASDAQ: BRCD), Halliburton Company (NYSE: HAL), VIVUS Inc. (NASDAQ: VVUS), and in the United States Natural Gas (NYSE: UNG).  SIRIUS XM Radio Inc. (NASDAQ: SIRI) even made the list here ahead of next week’s earnings.

Alcoa, Inc. (NYSE: AA) was a mystery. It traded almost its entire open interest in the NOV $13 and $14 CALLS on Friday with more than 55,000 contracts traded just between the two contracts.  Shares rose nearly 4% to $13.14 and the 39+ million shares came to more than 150% of normal share volume.

Brocade Communications Systems, Inc. (NASDAQ: BRCD) saw its stock rise 3% Friday to $6.35 and volume more than doubled to over 35 million shares.  There were more than 19,000 PUTS that traded and a whopping 58,000+ CALLS that traded hands.  As we have covered before at 247WallSt and here, this continues to be takeover speculation.

Halliburton Company (NYSE: HAL) continues to see very active PUT and CALL volume trading as investors, traders, and speculators are trading in out-of-the-money contracts merely for upside and downside exposure if the Deepwater Horizon disaster comes back on it or not after the findings hit the stock so hard this last week.  Nothing specific here, but no resolution is there either and this will remain a highly volatile name ahead.

VIVUS Inc. (NASDAQ: VVUS) was no shock to see on the options volume explosion list.  However, more than 22,000 PUT contracts traded and more than 71,000 CALL contracts traded.  We covered the news and gave analysis in depth over at BioHealthInvestor.com and it seems as though the thought will be an approval is still possible despite the FDA initial denial.  Options in December and January will be the real hurdle months ahead.   A 26% gain to $7.75 was on more than 27 million shares, more than 8-times normal trading volume in the shares.

The United States Natural Gas (NYSE: UNG) may be perhaps one of the worst ETFs created due to performance and time erosion as futures contracts and the roll dates would force this to drift to zero if the nat-gas market went static and saw little price changes.  So, when you see 24,073 of the DEC-2010 $7 CALLS trade on a day when the shares are at $5.82 and low volume, you have to wonder.  Someone is betting on a very cold winter by the looks of it.  The DEC-2010 $7 CALLS had a prior open interest of only 6,432 contracts.

SIRIUS XM Radio Inc. (NASDAQ: SIRI) is perhaps more curiosity than it is highly unusual options trading activity off the charts.  Still, a $1.50 stock by many rights is nothing more than a call option in its own right.  Earnings are due this coming week (preview here) and here are the top contracts traded over the coming three months:
NOV-10    Vol.    OpInt
$1.50C    3,634    19,076
$2.00C    4,190    727
$1.50P    1,012    6,054
$2.00P    3,013    250
DEC-10    Vol.    OpInt
$1.00C    1,575    17,505
$1.50C    3,940    31,993
$2.00C    2,102    4,385
JAN-11    Vol.    OpInt
$1.00C    1,128    35,237
$1.50C    2,144    26,394

You can join the free daily email distribution list from 24/7 Wall St. to hear more about unusual options alerts and unusual trading patterns; also covered are big dividend trends, analyst upgrades and downgrades, day trader and active trader alerts, news on Warren Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

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Apple Options Remain Highly Elevated, With Bias As Well (AAPL)

Apple Inc. (NASDAQ: AAPL) remains the key stock and darling of America when it comes to this rally’s favorite darling stock.  Shares today are barely positive at $309.00.  That remains under the all-time highs from right before earnings but it is also more than $10 from the after-hours lows after earnings.  Options traders are still using speculative puts and calls to get their exposure without paying $300+ per share.  We wanted to take a look at the most active options that are being seen in Apple.

Apple has weekly option expiration contracts, and we are seeing volume there for the contracts that expire on October 28, 2010.  We have seen more than 9,300 of the weekly $310 CALLS trade versus an open interest of almost 5,200 contracts.  There have also been more than 9,700 contracts of the weekly $320 CALLS versus an open interest of almost 11,400 contracts.  Even the weekly $330 CALLS have seen 678 contracts trade versus an open interest of 2,147 contracts.

The weekly PUTS have also seen a whopping 10,062 contracts trade versus an open interest of 7,392 contracts in the open interest.  The $290 Weekly PUTS have seen 1,377 contracts trade versus an open interest of 3,389 contracts.

Going out to November shows and actively traded Apple as well:
CALL$    Vol.    OpInt
$310    7,120    34,883
$320    6,950    32,523
$330    5,156    28,457
$340    2,216    25,658
PUTS$    Vol.    OpInt
$270    1,754    16,917
$280    1,960    20,339
$290    3,605    27,231
$300    9,030    28,883

The pricing bias is also more active and more geared toward the long side of the story on the longer-dated LEAPS, implying that puts are cheaper than calls.  Going $40 out of the money in either direction is an interesting exercise.  The JAN-2013 $350 CALLS cost about $50.00 per contract.  The JAN-2013 $270 PUTS cost about $44.00 per contract.

The pricing bias in the JAN-2012 shows some of the same in the same speculative out of the money strike prices.  The Apple JAN-2012 $350 CALLS cost approximately $31.50 versus about $28.60 per contract for the $270 PUTS.

The Apple craze just won’t go away.

JON C. OGG

12:30 PM EST

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Wilmington Volume Spike Surge (WL)

Wilmington Trust Corporation (NYSE: WL) is surging today on talk of it having discussions with banks in Canada.  Shares were halted briefly on a spike higher, and after reopening the stock is up 13% at $9.15 on more than 4 million shares at 2:38 PM EST.

Average volume is 1.4 million shares and the 52-week trading range is $7.26 to $20.23.  Yesterday’s close was at $8.07.

JON C. OGG

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Apple Options Passing Open Interest (AAPL)

Apple shares are trying to hold on to being profitable on the day and any close above $314.74 will mark a positive close.  The problem is that shares hit $319.00 this morning and the average volume of 19.7 million shares has just been surpassed by 1:00 PM EST.  At 1:11 PM EST we have 20.4 million shares having traded hands.  Traders and speculators are using NOVEMBER-2010 options as the ‘cheap way to trade’ to get upside or downside exposure in Apple and still have a month until expiration.  These are the NOV-2010 select calls and puts showing contract volume versus the prior open interest.

CALL$    Vol.    OpInt
300.00    8,000    26,904
310.00    13,449    30,886
320.00    23,004    20,653
330.00    25,077    22,085
340.00    17,751    13,885
350.00    14,731    10,573

PUT$    Vol.    OpInt
290.00    8,626    13,767
300.00    11,289    19,148
310.00    7,117    7,440
320.00    6,326    3,505

If you tallied just these few contracts without the thousands of other contracts around other strike prices, this would be more than 100,000 contracts in the calls alone.  That is another 10 million shares equivalent on a fully leveraged basis.

JON C. OGG

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Zagg Adjusts Guidance for 2010

Zagg Incorporated (NASDAQ: ZAGG) is up 29.88% at 8:35 AM EST this morning, from $5.12 to $6.65, after announcing an expected full year 2010 revenue growth of 70%.  The company, which designs and creates mobile phone accessories, also expects third quarter 2010 revenues to surpass $22 million.

Zagg has traded 32,640 shares in pre-market trading this morning, compared with their average of 475,918.  The move also comes during a 52-week range of $1.90 to $7.00.

-Michael B. Sauter

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After Hitting 52-Week Low, Tongxin Plummets Pre-market

Chinese auto parts company Tongxin Internation Limited (NASDAQ: TXIC) hit a new 52-week high yesterday of $3.48 cents. This morning, it appears that this price won’t remain the 52-week low for long. At 8:26AM EDT, TXIC was trading at $3.12, down 58 cents (15.68%) from its close yesterday. At that time, the stock had traded 4,260 shares, with an average daily volume of 110,000 shares. The 52 week range, at least until market open, is $3.48-$12.07.

-Michael B. Sauter

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ActivIdentity Skyrockets On News Of Purchase

At 8:35 AM EST, ActivIdentity Corporation (NASDAQ: ACTI) is up 42.48% from $2.26 to $3.22.  The digital authentication and credential management company has also traded 786,400 shares alread, compared to their average of 145,205.  This increase in activity is the result with this morning’s announcement that the company will be bought out by the Swedish Assa Abloy for $162 million, or $3.25 a share.  The move comes during a 52-week period of $1.77 to $3.33.

-Michael B. Sauter

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After-Hours Price/Volume Leaders (AA, CENTA, CPHD, CYTX, DRWI, GENZ, KLIC, ONXX)

This Thursday marks the unofficial launch of earnings season and there are many stocks on the move.  Some are earnings, some are not.  We are tracking after-hours moves in shares of Alcoa Inc. (NYSE: AA), Central Garden & Pet Company (NASDAQ: CENTA), CEPHEID (NASDAQ: CPHD), Cytori Therapeutics, Inc. (NASDAQ: CYTX), DragonWave Inc. (NASDAQ: DRWI), Genzyme Corporation (NASDAQ: GENZ), Kulicke & Soffa (NASDAQ: KLIC), and Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX).  Timestamps are between 5:20 and 5:25 PM EST on all quotes…

Alcoa Inc. (NYSE: AA) beat muted earnings expectations and talked up demand for aluminum from 12% to 13%… Shares are now trading up 2.95 at $12.55 and there have been as much as 2.6 million shares since the 4PM closing bell.

Central Garden & Pet Company (CENTA) appears to be a mis-quote or mis-print or a trade error from an after-hours trader as the stock appears to be up 19.9% to $12.81 but only on 4,500 shares since the close.  The close was $10.83 and the bid-ask spread is a mile apart on this one.

CEPHEID (NASDAQ: CPHD) may be a head-fake as well as the stock looks like it is getting crushed after it announced that it will collaborate with Novartis (NVS) on chronic myelogenous leukemia.  Unfortunately it appears that this is an $8 million deal, which is not more than a line-item for a company that had a market cap of $1.16 billion before the news.  Shares are down about 47% at $10.22 on only about 15,000 shares after the 4PM closing bell.    The after-hours prints now appear to be coming in at $18.26 for a 6% loss rather than the after-hours crush originally seen.

Cytori Therapeutics, Inc. (NASDAQ: CYTX) is getting hit after disclosing that it plans to have a secondary offering of its stock.  Shares are trading down 12% at $4.68 on 60,000 shares since the 4PM closing bell.

DragonWave Inc. (NASDAQ: DRWI) had a good day with a 5% gain and then came positive earnings news.  Shares are up another 6% at $7.07 on almost 30,000 shares since the 4PM close.

Genzyme Corporation (NASDAQ: GENZ) may be delusional since no one else is a buyer-apparent, but the company has formally rejected Sanofi-Aventis (NYSE: SNY) and its $69 cash bid.  It now is exploring alternatives and will seek a formal sale process to other buyers.  Genzyme shares are up only 0.6% at $72.80 after the close and there have been about 750,000 shares traded since the 4PM close.

Kulicke & Soffa (NASDAQ: KLIC) may have been a deep a value screen stock this morning, but ‘all the bad news that should have been priced in” was not… Shares are down almost 9% at $5.91 on almost 100,000 shares since the 4PM close.

Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX) is delaying its New Drug Application filing with the FDA for carfilzomib and shares are getting hacked by -8.5% at $25.15 on over 500,000 shares since the 4PM close.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

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TiVo Score on Patent (TIVO)

TiVo Inc. (NASDAQ: TIVO) just saw a major volume spike on a press release that it has won a patent ruling from the US Patent & Trademark Office.

TiVo shares had been trading close to $9.50 but the stock is now up11% at $10.21 and the pop after the news release did have an intraday high of $11.20.

At 2:44 PM EST we have now seen 6.2 million shares trade hands versus an average of about 2.2 million shares per day and the 52-week range is $6.92 to $18.93.

Keep in mind that this is still a step in the patent war process rather than a final-final resolution where money matters come to play.

TiVo commented, “We are pleased that the United States Patent and Trademark Office has reaffirmed the validity of all claims of the Time Warp Patent at issue in the second reexamination of the patent at the request of EchoStar. This decision by the PTO is final and not appealable by EchoStar. Today’s decision further validates our IP and brings us closer to ending EchoStar’s ongoing infringement. Moreover, we remain confident that the United States Court of Appeals for the Federal Circuit will uphold and enforce an injunction against EchoStar’s ongoing willful infringement of the Time Warp Patent.”

JON C. OGG

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Rumor/Chatter and Options Drive STEC Shares (STEC)

STEC, Inc. (NASDAQ: STEC) is no stranger to buyout rumors and positive talk around the company, but that is what is driving the stock today in both the common shares AND the stock options.  STEC designs, makes and sells enterprise-class flash solid-state drives for high-performance storage and server systems.

In Options for OCT-2010 CALLS:
$13.00 CALLS saw 6,995 contracts vs. 3,056 open interest
$14.00 CALLS saw 3,779 contracts vs. 4,754 open interest

There have also been over 2,000 CALLS tarded among various contract strike prices for NOV-2010 and the JAN-2011 $12.50 CALLS have seen almost 2,700 contracts trade versus an open interest of 8,743 contracts.

At 12:54 PM EST we have shares up over 8% at $13.09 on almost 3 million shares versus an average volume of 2.1 million shares.  The 52-week trading range is $9.47 to $28.88.

JON C. OGG

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Rumors Drive Volume (FFIV, ISLN)

F5 Networks Inc. (NASDAQ: FFIV) and Isilon Systems, Inc. (NASDAQ: ISLN) are both trading higher as buyout hopes continue to capture the imagination of Wall Street.

F5 Networks Inc. (NASDAQ: FFIV) may be hard to get excited about after a Reuters “takeover report” showed that it was approached about a takeover.  The reason for little excitement: it was more than a year ago.  the potential excitement today is that Reuters noted that it actually is still a possible takeover target according to “familiar people”…

The other name was Isilon Systems, Inc. (NASDAQ: ISLN) in takeover circles after reeports came that it hired Qatalyst as an investment advisor to explore a sale.  Isilon shares are up 9% at $25.21 on 3.3 million shares, about 4-times normal trading volume and the most shares traded since 3.5 million from August 23, 2010.

JON C.OGG

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