Too Many Options: Macro Dominates

by Enis November 7, 2012 5:03 pm • Commentary

Single stock stories much less relevant today, as the -2% move in the market took most everything down with it.  Here’s what caught our eye:

  1. SPY – The November regular expiry 140 puts traded about 350k times, massive volume for even a SPY strike.  This was clearly a protection put for large institutions, likely primarily buying to protect a break of 1400 on the SPX.
  2. VIX – VIX was not up much given the 2% move, as I wrote in the VIX Futures Snapshot.  The Nov 20 calls were the most active strike, trading 24k.
  3. TLT – The Dec 122 puts had a buyer of about 20k midday, paying 2.03 for the bulk of it, buying some protection on a day when TLT was up 2%.
  4. EEM – More protection trades, this time call selling.  Customer sold 25k of the Dec 43.5 calls at 0.38, and 9k of the Dec 44 calls at 0.27.
  5. VZ – 10K lot buywrite went up in the Apr 40 puts. The Jan’14 40 puts and 50 calls went up in a spread 10,000 by 7500. Verizon has said effects from Sandy could be significant. Tomorrow the CFO will be speaking at the Wells Fargo Securities 2012 Technology, Media & Telecom Conference. 30 day implied vol has been going up since Oct 5th (when stock topped) and is currently above 20, which is a high on the calendar year. .
  6. AOL – Had earnings on the 6th and was up 22% yesterday from 36 to 43.70 close.  It’s down 8% to $40. Over 24K options have traded, calls to puts 1.1:1. No trades larger than a few hundred options except a big trade of the Nov 39 calls that looks like they were bought around 4K times. IV30 is up 7 points to over 48. It had come in yesterday and is now as high as pre earnings. AOL was downgraded by Credit Agricole.
  7. JBLU – 4K Jan’13 6 calls traded for $.15, looks like a buyer. There is open interest on the line. Jan will be the next earnings month. Average volume is 1500 so this is a good size trade.
  8. BAC – The Jan13 10 calls were the most active single stock line, trading more than 86k .  Looks like a lot of it was seller initiated as leveraged bets were unwound.
  9. AAPL – Down more than 4%, and heavy options volume, but it was telling that the top 10 most traded lines were all weekly options.  That’s a sign that the bulk of the volume is still retail-based, and large institutions are not trading the options for protection (they are much less likely to use weekly options).
  10. NLY – This mortgage reit had heavy volume in the stock, as it made a 52 week low.  The Jan15 13 / 15 risk reversal traded 15k times, looks like buying call, selling put.