Too Many Options: $EEM, $EWZ, $FXI, $RSX, $MSFT, $BX

by Dan March 18, 2014 4:19 pm • Commentary

The second day of the week saw the second consecutive rally day for global equities, the first such streak in more than a week.  Emerging market etf flow dominated the action in the options markets. Here were some of the large trades and situations that caught our attention:

1. RSX – the etf that tracks Russian equities has bounced 12.5% off of last Thursday’s lows, nearly approaching the key technical level that the stock broke down from at the beginning of the month. While options volume ran almost 2.5x average daily volume over the last month, premium selling dominated the flow as implied volatility remains elevated. The largest single block was a sale of 10,000 of the April 23 Puts at 1.125 to close.  There were also closing sellers of upside calls, specifically in the April 25 strike where 10,000 traded on the day.  We closed our bullish play on the etf by selling to close the April 22 calls for a quick gain (read here).

2. EWZ – the etf that tracks Brazilian equities saw its largest one day gain since Feb 27th and options volumes ran hot at 2.75x avg daily volume with puts outnumbering calls more than 2 to 1.  The largest trade was a bearish roll where it looked like a trader sold 24,000 of the March 34/38 put spread at .05 to close and bought 50,000 of the April 39 puts for .88 to open when the stock was 40.05.

3. EEM – the etf broke through mild technical resistance at its declining 50 day moving average this morning and now looks poised to make a move back to further resistance at $40, just below its declining 200 day moving average.  Puts outnumbered calls at almost a 2 to 1 ratio.  The largest trade looked like a bearish roll where a trader sold 18,000 June 38 puts at 1.25 to close and bought 18,000 Sept 38 puts for 2.10 to open when the stock was 39.38.

4. FXI – While we are on the topic, the last left for dead emerging market etf left to rally was from China. There was a large opening trade where a trader bought what we options traders refer to as a call spread risk reversal where the initiator sold 30,000 May 31.5 puts at .50 to open and bought 30,000 of the May 34 /35.50 call spreads for .56 vs selling 1.3 million shares.

On the single stock front:

5. MSFT – the stock broke out to new 52 week and new 12 year highs.  We highlighted the potential for a break out yesterday and bought a call calendar to play for it (read here). Just prior to 11am when the stock was 39.46, a trader paid up to .32 for 19,000 March 28th expiration 40 calls.  Options volume was massive in the stock today trading 5.2x average daily volume with calls outnumbering puts by more than 2 to 1.

6. BX – there was an opening seller of 20,000 of the April 32 puts at .53.  This appeared to be an outright bullish bet when the stock was trading 33.88.  If the stock is above 32 in a little more than a month, the trader will collect $1,060,000 in premium.