Too Many Options: $AMAT, $MU, $WLT, $SFUN, $RIG

by Enis June 24, 2014 6:07 am • Commentary

Both stock and options volumes were light as the indices traded in a very tight range for the second straight session.  Semiconductor stocks remained in focus, with AMAT and MU two of the most active names in options.

1.  AMAT – Closed at another new multi-year high, now up nearly 30% in 2014.  A trader sold to close 17,0oo of the Jan15 20 calls at 3.70, and bought 24,000 of the Jan15 24 calls for 1.54 to open when the stock was 22.83.  AMAT last traded above $24 in early 2004.  

2.  MU – The stock traded around unchanged last night after the company’s earnings release.  MU beat on both earnings and sales, but expectations were high after the stock’s 44% advance year-to-date.  The stock is indicated near unchanged this morning in the pre-market as well.  Options traded more than 3x the average one month volume, with weekly 30 puts, weekly 27 puts and weekly 32 calls the most active.  The October 25 puts traded over 12k at an average price of 0.56, the highest volume outside of weekly options.  We laid out some possible structures in yesterday’s Name That Trade post.

3.  WLT – Walter Energy has been decimated over the past 6 months, and is down 65% year-to-date amidst weakness in the coal market.  WLT advanced almost 5% yesterday, and there was a seller of 21k of the Jul11th 6 calls at an average price of 0.277 on two separate prints, likely an overwrite against long stock.

4.  SFUN – Seller of around 17k of the Jul19th 9 calls at an average price of 0.43 to open throughout the session.  SFUN has declined 50% since early March.  The company does not report earnings until early August.

5.  RIG – Seller of 11k of the Jan16 30 puts at 1.06 to open.  This trade is similar to downside put sales in VZ and CSCO in Jan16 last week (see TMO from Friday), as a large investor is likely identifying value stocks with strikes that he or she thinks is unlikely to be reached over the next year and a half, and selling puts there.