Options Activity for Wednesday, June 02, 2010


US Airways Group Inc (LCC)

Big movements in US Airways (LCC) are apparent. Shares hit 52-week high and are up 77 cents to $9.41 amid relative strength in the airlines after BofA/Merrill reinstated LCC, UAUA/CAL, ALK, and LUV with Buy ratings. In LCC options, recent trades include a June 10 – 11 call spread apparently sold at 21 cents (28900X25900), which appears to be a roll of a bullish position opened in late May. Open interest in the June 10s is 30,000 and the contract traded at 23 cents, 25700X on May 26. Also traded today was a block of 21450 Jul 12 calls traded at the 32-cent asking price. It might be the same player — selling to close the June 10s at a 22-cent per contract profit, and then buying to open new positions in Jun 11s and Jul 12 calls.



Transocean Ltd (RIG) Transocean (RIG) is off $1.73 to $48.31 and implied volatility is moving up along with oil driller’s Credit Default Swaps. CDS protecting RIG’s debt surged 183 basis points to a record 590 today, according to Reuters (BP up 87 points to a record 255 and APC, 103 points to 430.) Fear of potential ramifications associated with the out-of-control spill caused by the Deepwater Horizon rig is being felt in the share price (down 43 percent since 4/28), the CDS market, and in options action. Another 39,000 calls and 34,000 RIG puts traded so far. Activity is scattered across many contracts and the front-month June puts and calls are seeing 43 percent of the total volume. Meanwhile, implied volatility is still on the move, up 7 percent to 91– compared to the low 30s before the disaster happened in late April.





Commercial Metals Company (CMC)

Commercial Metals (CMC) saw a morning spike, is up $1.11 to $15.97, and it looks like speculative call buying in Jun 16 and 17.5s. The top trade is 169 June 16s at the 80-cent asking price. 1227 traded. Another 2199 June 17.5s changed hands. Some of the activity might be offsetting, as open interest is sufficient to cover in both contracts. Implied volatility is up about 1.5 percent to 63.5. No headlines on the stock. Next earnings report is due on June 22, after the expiration. Company provided upside guidance on May 18.



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