Too Many Options: $EA, $GRPN, $INTC, $JPM, $MSFT, $VIX

by Dan December 16, 2013 4:00 pm • Commentary

In a repeat of last week, there was some longer dated upside call buying in the VIX as traders either view VIX calls as a cheap hedge against longs or they think that the first four months of 2014 are likely to be a heck of a lot more volatile than 2013.  On the single stock front some of the largest prints were in large cap tech:

1. VIX – shortly after the open a trader bought 26k March 23 calls paying 1.05 to open.

2. MSFT – a trader sold to close 30k Dec 37 puts at .67, while another trader rolled up and out some calls by selling 20k Dec 38 calls at .17 to close and bought 20k Jan 40 calls for .30

3. ORCL – company reports their fiscal Q2 earnings Wednesday after the close and the options market is implying about a 4.5% one day move vs the 4 qtr avg move of about 5.5%.  One trader rolled down a bearish bet or protection by selling to close 17k Dec 34 puts at .93 and bought to open 17k Dec 33 puts for .53

4. INTC – There was a seller of 20k Feb 26 calls at .34, appeared to be closing.

5. EA – opening trade for the week, a trader sold 16k Dec 21.50 / 22.50 call spreads at  .15 when the stock was 22.23.

6. GRPN – a trader bought the Dec (Friday expiration) 10.50/11 call spread when the stock was 10.19, paying .13 for 11k.

7. JPM – a trader bought 10k January 3rd weekly expiration 57.50 calls for .55 to open when the stock was $56.64. This trade breaks-even at $58.05 on Jan 3rd expiration up about 2.5%, which would also be about a dime shy of the 52 week highs made last month at $58.14.

The purchase of the Jan 3rd weeklies is a bit curious when you consider that JPM will report their Q4 earnings on Jan 14th prior to the open, which for all intents and purposes should be the next real catalyst for the stock. From an implied volatility perspective the Jan 18th regular expiration 57.50 calls are only bit more expensive than those that were purchased in Jan 3rd expiration. If it were me and I was making an outright bullish bet I would have opted for the slightly longer dated, slightly more expensive in vol terms and higher premium Jan 18th regular expiration calls that capture the earnings event.