Too Many Options: $UPS, $CSCO, $DG, $DOW, $XLE, $TWTR

by Enis December 30, 2013 7:58 am • Commentary

Last week was the lowest volume week in 2013, and this week is likely to be another snoozer, with New Year’s Day on Wednesday.  Friday options volumes were light, but here were the standouts:

1.  UPS – Over 40k of the Jan18th 100 calls traded on Friday to open at an average price of $5.00, mostly in the morning.  Since there is only 28 cents of time value in that open (and $4.72 of intrinsic value), it’s bizarre to see an in-the-money call trade in such size, but it could be related to tax management between now and the New Year.  No dividends or earnings in UPS until late January.  UPS has been on a big run ever since its clean breakout above $90 in October.

2.  CSCO – The Jan18th 22 calls traded over 30k at an average price of $0.26.  CSCO hit its highest level since its earnings gap lower, though $22 is important resistance based on the 1 year chart.  Next earnings report is in mid-February.

3.  DG – Seller to open of 30k of the Jan18th 60 calls at 1.70.  DG is battling to hold the $60 breakout from earlier this month.  The stock’s more important support is in the $55-$56 area, which was the prior all-time high in mid-2012.  DG next reports earnings in late March.

4.  DOW – The Jan18th 45 calls traded over 20k at an average price of $0.94.  The line has over 100k of open interest.  DOW’s price high last week (and for the year) is $44.99.  That is also the highest level for the stock since December 2007.  Earnings are in late January.

5.  XLE – Big buyer (50k) of the Jan18th 87 puts for 0.81 on Thursday.  That line traded over 20k on Friday, mostly buyer initiated once again.  XLE approached its all-time high from 2008, which is at $91.42.

6.  TWTR – After a flurry of call buying last week, the call to put open interest ratio moved from over 1.5 to 1 in favor of puts, to 1.1 to 1 now in favor of calls, quite a shift in just a week.  On Friday, the Jan18th 85 and 90 calls were the most active lines, both trading over 20k.  Implied volatility actually declined a bit on Friday (though 1 month vol still around 100) despite the 13% decline in the stock, as the stock’s pullback ended TWTR’s parabolic move for the month of December.