Too Many Options: $DOW, $EEM, $HD, $VZ, $WFM

by Dan February 26, 2014 4:01 pm • Commentary

Below is a list of some of the more interesting options blocks that traded today:

1. DOW – with the stock at new multi-year highs &activists on its heels, calls getting busy. 40,000 Jan15 50 calls are bought for $2.78 to open with breakeven up about 10% on Jan15 expiration.

2. EEM –saw put buying for second consecutive day, buyer paid .77 for 52k Apr 37.50 puts to open. yest there was a buyer of 65k Mar 37.5 puts .40

3. WFM – earlier in the Chart of the Day: I highlighted the fairly ugly technical set up, but also the realtively cheap implied volatility.  A savvy options trader that I know agreed and liked the idea of playing for a move one way or the other by May expiration (which will capture the next earnings event) and bought the May 52.50/55 strangle for 4.35.  For this trade to make money the stock will need to move a lot in the interim to keep a long premium strategy like this in the game heading into the earnings event expected in early May.

4. VZ  – on Friday we highlighted a call sale where a trader sold 40,000 April 49 calls at 1.05 to open, we assumed that it was likely an overwrite to a long stock position.  Today it appears that the investor closed the position with the stock down about $2 since the sale, buying back 40,000 of the April 49 calls for .47 to close.  Also there was a bullish risk reversal that traded in the morning where a trader sold 4,000 of the May 44 puts to buy 4,000 of the May 48 calls to open and collected 10 cents.  This trade breaks even on May expiration at 47.90 on the upside and starts to lose at 43.90 on the downside.

5. HD – Options volumes continued to run hot a day after yesterday’s Q4 results, trading 2x average daily volume, with calls outnumbering puts at a ratio of 4 to 1.  The largest options print on the day was a bullish roll, where a trader sold 7,000 of the March 82.50 calls (when the stock was 82.50) at 1.07 to close and bought 7,000 of the May 85 calls for  1.19 to open.  This trade breaks-even at $86.19 on May expiration, up about 5.5% from today’s close, which would also be at new all time highs.