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1334 ET 13Feb2013-BP options traders own April volatility with $44 strike calls--------------------------------------------------------------------------------Option volume on BP Plc was active for a third straight tradingsession since Tuesday. Over that period, the volume totaled nearly 338,000contracts, triple the normal level, with the April $44 strike calls dominatingthe flow, according to Trade Alert. Investors on Friday bought 30,189 April $44strike calls for $1.05 per contract. It was tied to 1.29 million shares for$43.30. Then 20,000 of those calls were purchased on Monday for 79 cents andfinally 22,000 more contracts were bought on Tuesday for 91 cents and appearedtied to 731,000 shares for $43.02. Open interest increased on each tranche, tothis Wednesday morning's level of 89,694 contracts, the largest open position inthe name, said Trade Alert president Henry Schwartz.
"With 60-day implied volatility in the 9th percentile over the past year,the participants are getting long April volatility likely to get exposure todevelopments related to the Macondo trial," said derivative strategists atSusquehanna Financial Group in a recap of this week's equity trades. "They mayalso be directionally bullish, or could be replacing long stock with the calls."On the New York Stock exchange, BP shares fell 0.74 percent to $42.48 duringWednesday's afternoon session. BP is slated to go to trial in federal court inNew Orleans Feb. 25 on potentially massive spill-related civil claims from theU.S. Justice Department, states along the U.S. Gulf Coast, and others. The keyissue in the case is the level of BP's negligence in the Gulf of Mexico Macondowell blowout in 2010.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1233 ET 13Feb2013-Cisco options imply about 4.75 pct earnings move - trader--------------------------------------------------------------------------------The options market estimates that Cisco Systems Inc's shares will moveabout 4.75 percent in either direction by the end of this week, following thecompany's fourth-quarter earnings after the market close, according toRiskReversal.com. The implied options move is less than the historical averagemove of 6.75 percent over the past four quarters and the average move of 8.4percent over the past eight earnings announcements.
With the stock trading at around $21, the Feb. 16 $21 straddle is offered at$1, and if bought, would need a $1 or $4.75 percent move by Friday's close tobreak-even, said Dan Nathan, a co-founder of RiskReversal.com in a report.
Open interest is heavily skewed towards calls, at around 1.6 to 1. Optionvolumes on Cisco over the last month have been similarly skewed towards calls,though puts and calls have traded equally in the past week, Nathan said. Thelargest individual lines of open interest are in Feb. 16 expiration: Thatincludes 106,000 Feb $21 strike calls, 104,000 Feb $22 strike calls, and 63,500Feb $20 strike puts. Cisco shares rose 0.14 percent to $20.99.
During Wednesday's early afternoon session, volume on Cisco consisted of75,000 calls and 69,000 puts changing hands so far, according to Trade Alert.The Feb $20 strike puts with volume of 15,922 contracts traded were the mostactive.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1200 ET 13Feb2013-February VIX futures settlement comes at 1307--------------------------------------------------------------------------------
The February futures tied to the popular VIX settled on Wednesday morningat 13.07, a value that is calculated by the opening prices of a strip of Marchoptions on the S&P 500 index.
The settlement print was not far from the volatility reading of the CBOEVolatility Index, which stood at 13.15, up 4.03 near midday on Wednesday.
March VIX futures, which are now the front month, rose 0.25 to 15.05 whileApril futures were at 15.94, up 0.14.
An interesting options trade on the index on Wednesday is the May 18-25 VIXcall spread bought for $1.035, trading 113,000 times. The hefty premium purchaseprobably replaces upside calls that expired worthless this session, saidWhatsTrading.com options strategist Frederic Ruffy. The largest open interestpositions in the February term heading into expiration were Feb 20, Feb 17, Feb16 and Feb 22 VIX calls, he added. The VIX Index, a 30-day risk forecast ofmarket volatility, is calculated using the mid-points of the bid/ask spread froma strip of near-term SPX options.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1128 ET 13Feb2013-Short-term protection in IWM, SPY ETFS ramp up this week--------------------------------------------------------------------------------
Investors appear to be ramping up their short-term protection this week withMarch Quarterly options in the SPDR S&P 500 Trust and iShares Russell2000 Index Fund being in particular focus, on concerns about a moderatepullback in equities through the rest of the first quarter. In many cases,traders have been enacting intricate low-cost spreads in these products thatinvolve the sale of further out-of-the-money puts to finance closer-to-the-moneyputs, implying they are fearful of a more moderate move, but less concerned witha more pronounced sell-off, according to Susquehanna Financial Group in a note.
The uptick in protection in recent sessions comes ahead of the threat ofautomatic government spending cuts, known as "sequestration," set for March 1,if Democrats and Republicans fail to agree on budget reforms. One of the commonhedging strategies in recent days has been put butterflys, with large tradesenacted in the March Quarterly options in the SPY and IWM exchange-traded funds.For example, on Tuesday, SFG derivative strategists said an IWM investor bought20,000 of the $90-$85-$80 put flys for 76 cents after 50,000 of the $88-$85-$82put flys were bought for 29 cents on Monday.
Meanwhile, a couple of calendar put spreads in the S&P 500 Index alsoseem to reflect the idea that investors are looking for a safety net but arewilling to take on risk if there is a more pronounced sell-off, SFG said.
In one trade on Tuesday, investors bought 7,000 April 1,450 SPX puts versusselling 7,000 Sept 1,300 SPX puts, paying five cents for the package, SFG said. On Tuesday, a large ratio put spread buyer also emerged in the SPY ETF. SFG saidthe SPY March Quarterly $147-$135 1x3 put spread was bought for 52 cents, andinvolved the purchase of 75,000 $147 puts versus selling 225,000 $135 puts.
Reuters Messaging: doris.frankel.reuters.com@reuters.net0924 ET 13Feb2013-Total U.S. option open interest stands at 4.63 mln contracts--------------------------------------------------------------------------------
A total of 16.1 million contracts changed hands in the U.S.-listed optionsmarket on Tuesday, resulting in net open interest growth of 2.07 million callsand 2.56 million puts, according to Trade Alert.
Bank of America Corp, Dell Inc, Apple Inc and BestBuy Co attracted the greatest increase in option open positions, datafrom Trade Alert showed.
Top five new positions opened include 35,000 Best Buy June $18 strike calls,25,000 News Corp January 2014 $32 strike calls, 25,000 News Corp Jan2014 $35 strike calls, 22,000 Bank of America August $9 strike puts and 21,000 BP Plc April $44 strike calls, Trade Alert said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net (Editing by Andrew Hay and Grant McCool)
