Too Many Options: $VIX, $EEM, $EFA, $SIRI, $S, $GM, $MTG, $ABX

by Enis March 17, 2014 6:01 am • Commentary

The S&P 500 index closed at its lowest level since February 21st, and the DJIA neared the 16000 level after falling all 5 days last week.  However, CBOE composite put/call ratio was quite low, at 0.77, though VIX calls were very active for protection trades.

1.  VIX – Over 1.5 million VIX calls traded, one of the most active days of VIX call trading in the product’s history.  VIX 30 day implied vol neared 100, at the high end of its 2 year range (read our thoughts on VIX implied vol in a CotD post from 2.5 weeks ago).  We took off our long VIX structure for a gain.  The March 20 calls, May 20 calls, and Jul 20 calls all traded over 150k, and the March 17 and March 18 calls traded over 100k.  Call to put ratio was over 5 on the day.

2.  EEM – EEM puts were extremely active once again, trading around 2.5x the 1 month average daily volume.  Two large put rolls.  First, a trader sold 125k of the March 39.5 puts at 1.24 to close, and bought 125k of the April 39 puts for 1.47 to open.    Later in the day, a trader sold 98,000 June 30 puts at .26 to close, and bought 80,000 of the Sept 30 puts for .62 to open.  EEM last traded at 30 in late 2008/early 2009.

3.  EFA – Similar to EEM, a big roll of puts from June to September in EFA, as traders adjust macro positioning given the continued tensions in Ukraine.  In the afternoon, someone sold 130,000 June 45 puts at .06 to close, and bought 80,000 Sept 45 puts for .34 to open.  $45 was an important support level from 2010 to 2012, and EFA has not traded below $45 since mid-2009.

4.  SIRI – Sirius stock has stagnated since its early January pop, which was due to Liberty Media’s announcement of a $3.68 bid to acquire the stock.  After significant shareholder opposition, Liberty announced on Friday that it had dropped its bid.  Meanwhile, SIRI announced a resumption of its buyback program.  The stock bounced 2% as a result.  Around 150k of the Jan15 4 calls traded for an average price of $0.247, mostly buyer initiated.  The break-even level on that trade is around $4.25, a level which SIRI has not touched since 2006.

5.  S – Buyer of 50k of the May 9 calls for 0.62 to open.  The May 11 calls also traded 30k for 0.19 just before the close.  The stock is down 18% so far in 2014, after a stellar run in 2013, both before and after Softbank’s acquisition.

6.  GM – Stock recovered to close in the green after hitting a 6 month low intraday.  The $33.50-$34 support area is a crucial spot to watch for GM.  GM was down almost 10% on the week.  Nonetheless, most of the options activity has been bullish.  The June 35 calls traded almost 30k at an average price of $1.626, mostly from a buyer early in the day.

7.  MTG – Seller of 23k of the Jan15 10 calls at 0.92 to close midday.  MTG’s uptrend has not made much progress since early August.  The stock has not traded below its 200 day ma, now around $7.50, since late 2012.

8.  ABX – ABX is up almost 20% year-to-date, as the precious metals complex remains strong.  Seller to close of around 20k of the Jan15 20 calls at an average price of $3.13 throughout the day.