CDNS, VIX Options – Unusual Trading Activity – November 15, 2013

| November 15, 2013 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in Cadence Design Systems (CDNS) and CBOE S&P 500 Volatility Index (VIX).

As many of you know, unusual options volume can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week:

Cadence Design Systems (CDNS)

A huge block of puts traded this week in semiconductor design company, CDNS.

Cadence is currently trading for $12.79 per share and is down 5% for the year.  The share price is just 5% above the 52-week low of $12.15 and is 20% below the 52-week high of $15.96.

A large trader sold 20,000 February puts for $0.35.  Open interest was only around 300 contracts, so this is clearly a new, opening trade.

The trade will be maximized if CDNS closes at or above $12 on February expiration.  The trader would then collect the entire amount of the premium.  Since this isn’t a very active options chain, a big trade like this usually implies a very strong opinion about the stock price.

CBOE S&P 500 Volatility Index (VIX)

Another massive trade hit the tape in the VIX.

VIX, the investor fear gauge, is trading at $12.14.  The index is trading just about 1% above the 52-week low of $11.99 and 47% below the 52-week high of $22.72.

The always active VIX saw a boatload of February 21 calls trade.  50,000 contracts traded in blocks of 2,000 at the price of $1.35.  That means the trade will be a winner if the VIX closes above $22.35 on February expiration.

There are a couple possible reasons behind the trade.  First, it could just be a bet on higher volatility early next year – maybe due to the budget/debt ceiling deadlines.  Or, it could be a very large hedge against a long portfolio.

More Options Ideas…

That wraps up this week’s unusual options trading and volume…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

So keep an eye on your email inbox… we have a lot more options trading ideas coming your way!

Yours in Profit,

Gordon Lewis


Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.