Too Many Options: $FB, $RSX, $HLF, $GM, $S

by Dan March 17, 2014 4:33 pm • Commentary

Here are some large options trades and/or activity that caught our eye today:

1. FB – the stock had a very volatile session, after opening up in the morning it traded off almost 3% and then spent most of the afternoon rallying back.  In the morning there were 2 very large options trades, one where a trader was rolling a bearish view and the other rolling a bullish view.  First when the stock was $67.97 shortly after the open, 19,000 of the March 28th expiration 67.50 puts were sold at 1.59 to close, while 19,000 of the march 28th 65 puts were bought for .83 to open.  On the bullish side, a trader expressed increased confidence that the stock will continue higher in the coming months.  When the stock was $67.31 the trader sold 46,000 June 65 calls at 7.825 to close and used some of the proceeds to buy 56,000 June 70 calls for 4.65 to open. (here’s our current FB trade)

2. RSX – the etf that tracks Russian equities has had a nice 2 day bounce into and out of Sunday’s Crimean referendum, now up 7.25% from Thursday afternoon’s lows.  Options activity was brisk today at about 2.5x average daily volume with puts surprisingly outnumbering calls at ratio of 3 to 1. Most of the put activity was in the March 20 puts where there was a large closing seller at .05 for most of the day, more than 43,000 traded on the day.  The options trade in nickel increments and if the stock stays here it is very unlikely that the stock will trade lower this week and they will likely expire worthless. (here’s our current RSX trade)

3. HLF – the stock broke last Wednesday’s lows (when the stock was halted in the wake of the company’s acknowledgement of a letter of inquiry from the FTC.) Options volumes continue to explode with today’s activity equaling 2.3x average daily volume.  Puts continue to dominate the flow with the March 56 puts the most active today with 3700, followed by 3200 of the Jan15 50 puts trading hands.  The Jan15 50 puts are the largest single line of open interest and thought to be the exact strike that many believe short seller Bill Ackman bought more than 45,000 of back in January.

4. GM – the hits keep coming for the beleaguered automaker as the company announced a new recall today of 1.55 million cars and acknowledged that they will take a charge of $300 million in the quarter.  Options volumes ran about 1.5x average daily volume with puts and call activity evenly matched at about 80,000 each.   The stock actually staged a fairly impressive comeback after giving back early gains, closing near the highs of the day and making a very important technical hold above key support and last week’s low. (here’s our current GM trade)

5. S – Early today, someone bought the May 9/11 1×2 call spread 15000 by 30000 times paying .68 in the 9s and selling the 11s at .17 (the spread costs .34) Break-evens on this trade on May expiration is 9.34 with risk probability decreasing above 11. This is a nice mildly bullish trade if naked and if it was against a long is a cheap way to get some upside leverage with an effective call away in the stock at 12.66.