A look at the market's key fear gauge is wrinkling a few brows. But in the meantime, there are small, interesting options trades brewing on this summertime Friday.
First off, the
Chicago Board Options Exchange
volatility index, or VIX, brushed with 52-week lows yesterday but has since risen slightly. "Teenaged volatility bothers everyone," Greg Simmons, an options specialist who is head of
Linear Capital Management
in Newport Beach, Calif., said of the index's recent reading in the teens.
At its current level of 19.96, up 0.45% from Thursday, the VIX is around December 1998 levels. (Last Friday the VIX hit 18.85.) The VIX also plumbed the teens in November and then back in July of 1998. "The action is eerily similar to last year," Simmons said.
Some of the bigger options plays of the day were in
. Implied volatility -- the amount by which a stock fluctuates annually, and generally a reliable signal of an impending event -- is through the roof. At 80, Roberts Pharmaceuticals' volatility is at its highest level since October 1998, when it hit 85.
In June it was at 60. "Somebody knows something, because they've been buying calls like crazy all morning, at every strike price through October," according to a Chicago-based trader in Roberts options.
Pricing was dropping hints all over the floor: With Roberts' stock up 1 7/16 to 25 3/8, the in-the-money July 22 1/2 calls gained 1 5/16 ($131.25) to 3 1/8 ($312.50); August 25 calls gained 1/2 ($50) to 2 7/8 ($287.50); and out-of-the-money October 30 calls gained 3/8 ($37.50) to 2 1/8 ($212.50). Volume in all those strikes totaled a few hundred contracts, nearing the total open interest.
, a diversified food company, also hit the most-active boards, with a 2,200-contract trade at 11:50 a.m. EDT in the August 50 calls. The option price was down 3/8 ($37.50) to 1 3/8 ($137.50), but the price indicates "it was an institution making a purchase," said Joe Sunderman with
Schaeffer Investment Research
. "No one trade of that size would be retail. But the stock has been moving sideways, while the rest of the market has been moving up. Not a good sign."
With the stock rangebound it could also be an institution selling calls against its stock position, anticipating the stock will stay flat until August expiration.
Bestfoods shares were off 1 1/8 to 48 3/4.