The S&P 500 sold off about 14 points (0.8%) and the CBOE Volatility Index (VIX) closed at 18.59, the highest level in several months. A number of names saw speculative flow in the form of call buyers, which suggests a view that some stocks are less likely to be hit by a global market pullback, if one were to come along soon.
Building Materials company Masco (MAS) closed up $0.33 at $19.88 in active trading of 4.5 million shares and options volume was 10x the daily average with 18,000 calls and 1,000 puts trading. The top trades surfaced early when an investor bought the October 19 - 21 call spread on MAS for $1.05, 6,000x, and appears to be rolling a position down in strikes. October 21 calls saw opening activity on 5/14 (3,000 contracts) and 5/22 (3,000 contracts). June 21 and July 19 calls on MAS are also busy, but no immediate news to explain the relative strength and bullish activity in the name. The stock is up nearly 20% year-to-date, but well off the high of $22.83 seen in mid-May.
Large call spread in Achillion Pharma (ACHN) Wednesday indicates a customer doubling up on a trade opened May 31 when shares were about $0.50 above today's $7.82 close. Buyer paid $1.30 for 10,000 January 10-20 call spreads, a $1.3 million position that could pay off about 669% if shares were to exceed the 20 strike, currently 331% away.
Shares of Mattress maker Select Comfort (SCSS) saw relative strength Wednesday, with shares lifting more than $1 to close at $23.45. On the options front, a call buyer in SCSS September 25 strike, paid $1.60 for 2,500 contracts to open a new position struck 8% out of the money. This position is now the second largest block of open interest in the stock. Shares had been above $28 until the January 2013 earnings and today's order flow seems to be reflecting expectations for a return to those levels through mid-September.
CONSOL Energy (CNX) was busy with 6,600 calls trading on Wednesday, or 4x the recent average, and a call:put ratio of 4:1. June 33 calls lead the most-actives, with $0.44 to $0.47 buyers as shares traded near $31.75. ATMIV lifted about 2 points.
Sodastream (SODA) has been very busy lately with on and off deal chatter making for choppy trading and an inverted skew (calls higher than puts). On the options front, an October 57.5 - 75 bullish risk-reversal is bought on the stock for $4.40, 3,100x. It's tied to 220,000 shares at $72.26 and maybe a stock replacement strategy after the 40% rally in the stock since May 8.
By Henry Schwartz
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