Weekend Review Finds 7 Unusual Options Trades (HGSI, GMCR, GENZ, SPWRA, ED, LOW, STX)

Posted in Options 
November 13th, 2010

A Friday afternoon and Saturday morning review of options trading often reveals some unusual patterns not always recognized during the trading day.  After looking through all of the options trading, we found very unusual options trading in Human Genome Sciences Inc. (NYSE: HGSI), Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR), Genzyme Corporation (NASDAQ: GENZ), SunPower Corporation (NASDAQ: SPWRA), Consolidated Edison Inc. (NYSE: ED), Lowe’s Companies Inc. (NYSE: LOW), and Seagate Technology PLC (NYSE: STX).  We have added color on each.

Human Genome Sciences Inc. (NYSE: HGSI) had a rough day Friday after the FDA has raised questions about its Lupus drug over safety issues.  Shares closed down 10.88% on Friday at $23.60 on 17 million shares.  Of the non-ETF options, it appears that Human Genome was the second most active stock by PUT option volume and the third most active by CALL option volume Friday.  Here is the put volume for NOV-2010 alone:
CALL$    Volume    OpInt
25.00    4,367    6,248
26.00    1,984    5,584
27.00    2,657    4,451
28.00    1,552    5,576
29.00    15,316    9,004
30.00    12,047    24,451
31.00    1,144    5,964
PUT$    Volume    OpInt
15.00    15,746    17,889
17.50    3,964    12,008
20.00    5,202    16,524
21.00    1,540    1,923
22.00    1,267    1,767
23.00    3,915    8,696

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) 3.7% at $31.45 on active share volume, the lowest close for Green Mountain since October 22.  The stock saw very active PUT option trading for NOV-2010 expiration, although we were told some was selling PUTS to capture some premium via a synthetic long trade.  Still, with the drop and the levels being the worst since, this activity is elevated as if something may be brewing here (no pun intended).
PUT$    Volume    OpInt
27.00    8,503    8,808
28.00    597    1,391
29.00    620    1,358
30.00    2,545    6,767
31.00    865    5,803
32.00    2,566    2,642
33.00    186    2,480
34.00    1,156    2,168

Genzyme Corporation (NASDAQ: GENZ) has action, and not favorable action on the surface. Traders appear to be betting that a breakdown comes in the Sanofi-Aventis (NYSE: SNY) merger and also that no new bidders will emerge by Christmas.  This activity is with shares at $69.84, the lowest close since August 27.  Here was the PUT volume for DEC-2010 expiration:
PUT$    Volume    OpInt
60.00    6,370    18,043
62.50    12    6,305
65.00    8,300    5,186
67.50    10    4,968
70.00    7,500    8,456

SunPower Corporation (NASDAQ: SPWRA) NOV-2010 CALLS were very active.  What is most interesting here is that this is already after earnings. Shares closed down almost 1% at $13.97, but someone is making a bet for a big move between now and this coming Friday.
CALL$    Volume    OpInt
14.00    1,244    3,320
15.00    11,439    6,890
16.00    2,469    1,347

Consolidated Edison Inc. (NYSE: ED) must have a dividend capture trade that took place.  Its annualized dividend is 4.8% today and the quarterly payout is $0.595  Shares closed at $49.74 on Friday and the NOV10 CALLS trading was as follows:
CALL$    Volume    OpInt
45.00    19,004    1,914
46.00    11,500    1,128
47.00    18,129    1,711
48.00    12,542    1,264
49.00    10,126    1,298

Lowe’s Companies Inc. (NYSE: LOW) was more active than normal with about 8,000 CALLS and roughly 6,000 PUTS both with NOV10 expiration.  With earnings on Monday, you know this is speculation and hedging going into earnings.

The Seagate Technology PLC (NYSE: STX) merger rumor and exploration of a private equity deal may have some legs back to it. Shares closed down 2.3% at $14.09 Friday.  The NOV10 $14 PUTS traded over 9,000 contracts, but the NOV10 CALLS with $14, $15, and $16 strike prices traded a combined amount just shy of 20,000 contracts.  In DEC10, the $12.50 PUTS traded 14,620 contracts versus 1,404 of the $14 CALLS, versus 3,081 of the $18 Calls, and versus 10.495 of the $19 calls.

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JON C. OGG

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