Too Many Options: T, DTV, AZN, EWZ, DXJ

by Enis May 20, 2014 7:00 am • Commentary

Lightest options volume of the year, with even SPY options trading only about 60% of average volumes.  The single stock options market was dominated by names involved in M&A activity.

1.  T – Stock has stalled near the $37 resistance level over the last month.  Following the DTV acquisition announcement, the most active options contract yesterday was a seller of over 30k of the June 35 puts at 0.25 in the morning.  T’s 5 year high is $39.

2.  DTV – DTV closed lower on the day despite the acquisition announcement.  Market participants seemed disappointed in the terms of the deal, including no breakup fee.  The June 85 calls and the June 85 puts were the most active liens, both traded over 15k.  30 day implied volatility in DTV fell to 13, an all-time low, as traders re-priced options lower given the long regulatory approval process and no expectation of a higher bidder.

3.  AZN – Stock declined 12% yesterday after rejecting the Pfizer offer one final time.  The June 80/85 call spread traded 0.625 in the afternoon.  30 day implied volatility in AZN hit a new multiyear high, up to 43, an indication that options traders don’t think the headlines surrounding AZN are resolved.

4.  EWZ – The Jul / Oct 50 call calendar traded 22k times for 1.22 right around noon.  EWZ has not traded above $50 since early November.  The high so far in 2014 is $49.81 from May 14th.  30 day implied vol has neared a 6 month low, near 21.

5.  DXJ – The August 40 / 50 collar traded 11k times for a 0.15 debit, trader buying the Aug 40 put for 0.40 and selling the Aug 50 call at 0.25.  DXJ has not traded below $40 since March 2013.