Too Many Options: $C, $EEM, $SPY, $VIX, $XLF

by Dan January 27, 2014 4:23 pm • Commentary

Macro themes continued to dominate the options flow, but there was an interesting seller of premium, likely a large holder looking to add yield to existing longs.  Below is our list of the most interesting untied stock, etf and index options activity on the day:

1.   VIX – after what seemed liked endless buying of upside calls for weeks from Feb expiration out to May, there finally emerged a seller either saying enough is enough on the near term volatility or monetizing a hedge.  In multiple lots, a trader sold a total of 250,000 Feb 22 calls at .75.  More than 300,000 traded, making it the single most active option on the day.

2. SPY – puts were active, right out of the gate this morning as the market went from green to red there was a buyer of 42,000 Apr 170 puts for 2.39… the 170 level is interesting because it corresponds with 1700 in the SPX, a very important technical level that also happens to be the index’s 200 day moving average, a momentum measure that it has not been below since November of 2012!  Later in the afternoon as the SPX was near the lows of the session there was a bearish roll in puts where a trader sold 60,000 Jan 31st (Fri)  179.50 puts at 1.50 to close & bought 60,000 Valentines Day (Feb 14th weekly) 177 puts for 1.65 to open.

3. EEM – as the macro continues to dominate the headlines, and on the heels of weak action in Asia overnight, put buying dominated the flow in EEM with calls outnumbered by puts at almost 3 to 1 with 420k trading to 140k calls.  The most active line was the Feb 37.50 puts, with a block of 53,000 being bought to open for .86.

4. XLF – as the bank etf hit its lowest level in a month this morning, a buyer paid .26 for the April 20/18 put spread 100,000x to open.  If this was protection it offers it down about 6%, starting at levels last seen in Oct and ending at levels the etf has not traded at since last April.

5. C – there was a pretty large trade that appeared to be a levered be to an existing long position where a trader bought the April 52.50 / 57.50 1×2 call spread 37,500 by 75,000 paying .52 to open.  If the stock is btwn 53.02 and 57.50 on April expiration the owner of this ratio spread can make up to 4.48 in addition to the returns of their long stock, if in fact this is an overlay to an existing long position. If not it is a fairly safe bullish bet despite selling the 57.50 in a ratio as the options market is placing only an 11% probability that the Apr 57.50 calls will be in the money on expiration.

6. RHT – Saw what appeared to be a buyer of 12,500 June 62.50/ 67.50 call spreads paying 1.02 to open

7. XOM –  After making  new all time highs last year, the stock has since sold off nearly 7% and sitting on an important technical support level at $95 that also happens to be the breakout level from when Warren Buffet acknowledged his stake in the company. This morning there was another large trade where it looked like an opening seller of 25,000 Apr 100 calls at .86, kind of an odd sale if an overwrite, not a whole heck of a lot of added yield.

8. JPM – Appeared to have an overwrite as well as an investor sold 43,000 April 60 calls at .53 to open.

9. MET – What appeared to be another overwrite in April, and investor sold 53,000 April 55 calls at .36 to open.

10. MO – And another, an investor sold 27,500 March 38 calls at .41 to open.

11. MRK – And lastly, as the stock made new 6 year highs in the morning, an investor sold 16,000 March     52.50 calls to open at 2.05,