Too Many Options – Who’s Afraid of the Big Bad Sequester?

by Kristen February 19, 2013 4:53 pm • Commentary

1. SINA – earnings today after the bell.  Almost triple the average option volume with just under 60K options trading.  Most trading was in the Feb22 weekly 50 puts and 57.5 calls, so a little interesting that the at-the-money’s weren’t the most active.  Also the Mar16 52.5 calls.  Stock was trading down 4% and IV30 went up 5% today although jumped up another 2 percentage points right at the end.  IV30 was not particularly high for earnings:

IV30 in red, HV30 in blue courtesy of LiveVol


The $52.5 weekly straddle was trading at around$5, a move which the stock is wont to do on earnings.

sina earnings

2. HUM– stock was down $5 today and put buyers were out in force particularly on the Apr 70 line.  Mar 65 and 70 puts traded heavily as well.  This negative action may have been do to a government proposal that could lower Medicare Advantage rates. 10 times average option volume.

3. SPWR – another day of exuberance as it is initiated a Buy at Citi.  Stock was up almost $2 and IV30 was up 19 points to 95.  Stock has been trading off the charts since January 2nd.

Courtesy of LiveVol

4. COF – big trading day with over 30K options trading versus an average of 7k.  A big call spread risk reversal went up in Jan’14.  Someone bought the Jan’14 55/70 call spread and sold the Jan’14 50 puts 5000 times each.  As Dan said about this in QuickHits:

Obviously a very bullish trade, but stock is breaking down, i guess the trader thinks preferable to buying which looks like catching a falling knife.

The Jan’14 47 puts also traded 5800 times.

5. JOY –  the call to put ratio is 5:1 today with over 27K options trading versus an average under 9K. Most activity has been in the Feb22 weekly 65 and 67.5 calls and the Mar16 65, 70, and 72.5 calls. All the upside calls previously had small open interest compared to today’s volume.

6. PPHM – buyers of over 23K Apr 2.5 calls in a product that averages 3K options a day.  They reported good results from a Phase II trial of a lung cancer drug.

7. JPM – the Apr 50/52.5 calls spread was sold 8250 times.  This is called a bear call spread as the seller wants stock to stay still or go down.

8. SHLD – the  Jan’15 60/ 70 call spread traded 10K times.   There is high open interest on these two lines.

9. VIX – an average trading day in the options with spot VIX closing at lowest point since April 2007.  People were buying some historically cheap protection in call spreads and upside calls.

10. VXX – a third more activity than normal with a few big trades. The Mar 20/17 put spread was sold 10,000 times.  And the Apr 16 puts traded 30,000 times for $.10.  IV30 was up 4.5 points.