One player in the options market last week committed significant capital in a trade takes advantage of current volatility levels and may indicate a view that action will may get more interesting in the weeks ahead.
On one bullish/bearish table I compiled we actually ran 'short' of bearish names, an unusual occurrence and one that I take as a warning sign for 'frothy' action.
Despite the negative headlines and weakness in shares, the order flow in GM seemed decidedly bullish throughout much of last week and the increased options activity comes ahead of several potential catalysts.
After a brief (one day!) dip on concerns about events in the Ukraine, US markets quickly resumed their bull run, with just a few names setting new 52-week highs during yesterday's trading.
There has been very light index and ETF volume this week, while single stock option volume is holding strong, trading slightly above normal. I believe this is a healthy sign for the industry, as it suggests less macro concern and more 'old fashioned' research into the fundamentals that contribute to share value.
Since 'greed' is now in the driver's seat (maybe fear stepped out to put chains on the tires), we are seeing several names with aggressive bullish option flow in the form of upside call buying coincident with increasing open interest and lifting IV.
It's not entirely clear what motivated the surge in interest in March 9 calls on Yamana Gold, but the timing was good because the contract has doubled in value from the prices seen Friday morning.
Debt trading is less transparent than equity or options, but one trader I spoke with said the debt was implying a better chance of survival for JCP than he would have expected so I may look for an upside trade in JCP.
One player in the options market seems to be anticipating positive news and opened a sizable spread trade on the stock ahead of the announcement.
The old adage 'don't fight the tape' seems to be in force at the moment, with several names seeing bullish flow this week that might warrant a long view, outright or in an outperformance type of strategy.