Too Many Options

by Kristen January 15, 2013 5:06 pm • Commentary

Another nothing day in the major indices but some fun things happening in individual names with AAPL’s break below 500 now a reality and investors’ shrug off of the Facebook announcement. Here are the options trades that caught our attention:

1. DELL –Dell jumped yesterday on reports of a buyout and Reuters headlines today stated that the buyout is moving forward and that banks have been tapped for financing.  Other analysts said the deal is unlikely.  343K options traded versus an average of 28K and calls to puts ratio was 2.1: 1.  The most active lines were the Jan 12.5 and 13.5 calls and the Feb 13  and 15 calls and 11 puts.  It looks like the Feb 11 put / 15 call strangle went up 19, 661 times.  IV30 was up another 7 points to 60 which appears to be a two-year high.

2. MS – Option volume was double the average today.  Morgan Stanley will announce earnings Jan 18th before the bell.  10K Jan19 20.5 calls traded on the offer in the morning. Most trading was in the Jan 20 and 20.5 calls. The Jan ’15 22 calls and puts traded 2500 times.  Seems to be opening.

3. VIX – The Feb13(w) 14/17 put spread was sold 25K times.  This is a bull put spread.  The Feb13(w) 25 / Mar20 23 call spread went up 17k times.  The Mar20 18 calls traded a 15,000 lot that looks like it was sold.  Spot VIX remains low at 13.50 and IV30 on the index looks to be at two year lows.

4. QQQ – Not an unusually large volume day, but the Mar 69/72 call 1×2 went up 17K times.  And the Jan19 67 / Feb16 66 call spread went up 23K times.

5. XLB – Materials Select Sector SPDR – 58,600 Feb 34 puts were bought for $.04 and $.05  in a name that averages 20, 000 options a day.

6. XLI – Industrial Select Sector SPDR – similarly 56,000 Feb 35 puts were bought for $.05.

7. KGC – over 70K options traded today versus an average of 7,600, primarily in the Feb 9 and 10 calls.  Earnings are the 13th.  Kinross is a gold miner.  I didn’t find news or similar action in the related names.

8. BIG – The Jan 30/ Apr 32.5 call spread traded 8200 by 10,000.  April, at least appears to be opening.

9. NKTR – Nektar Therapeutics was initiated with a buy rating at Lazard Capital. Stock was up almost 8% and 30-day implied vol up 8.5%.  The May 8/11 call spread traded 5000 times and the Feb 8 puts traded 7,600 times mostly bought.  The puts and May 11 calls, at least, seem to be opening.

10. APPL – Stock was down over $15 or 3% today breaking the 500 barrier, IV30 up 4%.  Most heavily traded line was the Jan19 500 calls.



Here were some trading from Monday worth noting:

1. XLF – over 65K Apr20 16 puts traded for $.32.  Looks like a buyer.  There is more than 165K open interest on the line.  There was a big buyer of these puts on Friday too.

2. WMT – Light day of option trading in the name, but a buyer of  3473 feb 67.5 puts and 2,517 mar 67.5 puts at the same time.  Walmart’s next earnings are scheduled for February 21st, 2013.

3. DG – in pretty much the only trading today, 25K Aug 50 calls were crossed broker/dealer to b/d for $.95.

4. FB – somebody bought the Feb16 30 calls and the Feb16 27 puts 17, 676 times paying through the market and sold stock.  This isn’t exactly a strangle as the the Feb16 30 calls are in the money.  It might be closing as the strategy is not clear otherwise.

5. STZ – Option volume record high today with almost 88K options trading.  The Feb16 37.5/42.5 call spread was bought 30K times, opening.  Implied vol has remained high and IV30 was up another 4.6 points today.   The Crown Imports ruling is due in February motivating speculation.

6. PCS – Jan/May 10 call spread traded 76K times.  Looks like it may have been sold. Open interest on the Jan line was 70k and 5K on the May line.  The only news I saw was that it was upgraded by Raymond James.

7. XLY – Mar 45/47 put spread bought 15K times.  There is sufficient open interest in the 45s, but less than 5K in the 47s, so it isn’t clear if opening or rolling.

8. XRT – Mar 58/62 put spread bought 10K times.  Looks to be opening.

9. DELL -large volume and vol spike on reports that the company is in talks with private equity firms to go private.  The Jan and Feb 12, 12.5 and 13 calls were the most active.