Strong Calls On Anglo Am; Puts On Savient
OptionMonster
12/30/08 - 03:21 PM EST
Anglo American
By Jon "DRJ" Najarian
Global mining company Anglo American is seeing heavy call action after announcing that it would cut 2009 spending programs by more than 50%.
The global mining company averaged 168 call contracts per day in the last month but saw about 14,000 calls in 15 minutes this morning, according to optionMONSTER's tracking systems. The intense action involving Anglo American, which accounts for 10% of the South African benchmark index, apparently followed a newsletter remarks about the company.
The call surge has also boosted AAUK's 10-day median volatility, which had fallen to 78 before today's trading. Today's action drove volatility up to 88 in 20 minutes.
Shares in AAUK are up some 3.6% to about $11.25 in midday trading. On Monday it was reported that Anglo American, which owns a 45% stake in the De Beers diamond company, is cutting its capital spending by more than half for 2009.
Savient Pharmaceuticals
By Mike Yamamoto
Savient Pharmaceuticals (SVNT Quote)is seeing heavy put activity today on high options volume despite a spike in the company's shares after regulators put its new gout treatment on a fast track for review.
Puts outnumbered calls as more than 12,000 contracts traded hands overall, dwarfing the 20-day average volume of 919, according to optionMONSTER's tracking systems. Volume was also high for the SVNT stock itself, more than triple the daily average as it approaches 5 million shares.
Savient's shares, which were up more than 30% this morning, are about 17% higher in afternoon trading. The heavy activity follows an announcement yesterday by the Food and Drug Administration to grant "priority review" status to the drug pegloticase, agreeing to decide whether to approve the treatment in six months rather than the usual process of up to a year.
VIX
By Chris McKhann
The recent market extremes coupled with the current low volume make investor sentiment indicators a hard read, but they are speaking loudly in a bearish tone.
The VIX is currently sitting at 44.28, up 0.39, or 0.89%. The nearest-month January future is higher at 46.15. The spot VIX had been above the front-month future pretty much continuously since Sept. 15, but when the spot price gets significantly below that future it is often a bearish signal for the overall markets.
The January future has been as much as 4 points higher than the spot. There have been other times that this gap has been wider than 3 points, such as back in late December 2007 when the SPX was at 1500 and again in late May 2008 when the index was still above 1400. Both were market tops before sharp declines.
The ISEE Sentiment Index is a put/call ratio with unique calculations that make it quite popular. High readings often coincide with markets about to drop, and yesterday the index had the highest reading of the year at 206.
Again, this type of sentiment reading is tricky at best with low volume and extreme markets. We have no history of these types of readings with the VIX above 40 and at market bottoms. Normally we get these readings at market tops, which makes them much easier to work with.
