Too Many Options: $AEO, $ECA, $EEM, $EFA, $FXI, $WMB

by Dan February 25, 2014 6:20 pm • Commentary

Despite the S&P 500 hovering just below the previous highs for the better part of the day, emerging market etfs continue to under-perform and, despite far lower than average volume the options activity today pointed to traders closing out bullish bets and adding new bearish ones. Below is a list of some of the more interesting options blocks that traded on an otherwise quiet day in the options pits:

1.  EEM – while options volume was only 60% of the average daily volume, puts outnumbered calls at a ratio of almost 4 to 1.   Shortly before 3pm in the afternoon when the etf was $38.99 near the lows of the day a trader bought 65,000 March 37.50 puts for 40 cents.  There was sufficient open interest to cover this trade but I suspect this was an opening  trade as the etf failed to break through near term technical resistance at $40 in the past week.

2. FXI – total options volume ran slightly above average daily volume with puts outnumbering calls at almost 3 to 1.  The most active line was the August 30 puts where 24,000 were bought for .91 to open vs also buying 556k shares of stock for 34.79.  There was also a closing seller of 10,000 of the Aug 36 calls at 1.46, closing a bullish bet.

3. EFA – the iShares etf that tracks the MSCI EAFE index (developed markets outside the U.S. and Canada) saw a decent size roll in puts.  A trader sold 27,000 March 63 puts to close at .15 and bought the Sept 65/60 put spread 27,000 for 1.20 to open

4. WMB – for the second consecutive day the stock saw bullish action in long dated calls.  Today a trader bought 20k of the Jan16 50/60 call spread for 1.44 vs selling 80,000 shares at 41.59.  Yesterday a buyer paid 1.38 for 30,000 of the Jan16 50/60 call spread to open when the stock was 41.97 .

5. ECA – in spite of natural gas taking it on the chin for the second straight day, capping a 2 day decline of 23%, one trader took a bullish stance in this nat gas producer by purchasing 10,500 of the July 21 calls for .55 to open when the stock was 18.95, making the break-even on this trade above the 52 week highs, up almost 14%.

6. AEO – There was a buyer of 15,000 April 15/17 call spreads paying about 42 cents.  The company had already pre-announced worse than expected Q4 results back in Jan and is expected to report full results on March 11th.

7. VZ – after seeing a few days of heavy premium selling, likely long holders looking to add yield, a trader bought 4,000 of the June 50/55 call spreads for .55