Too Many Options: $LNG, $AAPL, $FB, $TLM, $FDO

by Enis July 29, 2014 6:22 am • Commentary

Intraday volatility has been more elevated in the past week, though options volumes have remained subdued.  Traders are waiting for the heavy economic calendar in the second half of the week.

1.  LNG – The Jan16 80 / 90 call spread traded 36k times for 2.85 in the morning.  LNG hit a new all-time high of $76.46 last week, and the stock is up 150% in the past year.  Call options activity has been very active throughout that period, and total open interest favors calls over puts by about 2.4 to 1.  LNG has historically been a very volatile stock given the difficulty of valuing the company’s long-term cash flows with the uncertainty surrounding its liquefied natural gas supply contracts and project completions.  However, positive visibility in the past 18 months has led to new all-time highs in the stock.

2.  AAPL – Another new 52 week high in AAPL, and the stock is now less than 2% from its all-time high of $100.72.  AAPL is now up 23.5% year-to-date, with 5 months remaining in the year.  Weekly options remained the most active, though the October 100 strike calls traded over 20k on the session as well, at an average price of 3.31.

3.  FB – 30 day implied volatility hit a 1 year low around 30 after the earnings report last week.  10 day realized volatility is only around 36, even with last week’s 5% move higher on the event.  Nonetheless, call buyers were most active again, with a buyer of 27k of the Sept 80 calls for 1.86 in the morning.

4.  TLM – Rumors of a potential deal between Repsol and Talisman last week have not yet been confirmed, and TLM has sold off for the past 3 sessions.  However, buyer of 12k of the Jan15 11 calls for 1.125 in the morning yesterday, possibly in anticipation of an announcement.  Break-even of $12.125 on that trade, which has not been touched since late 2013.

5.  FDO – Options traded about 10x the average daily volume over the past month.  FDO closed above the proposed deal price of $74.50 from DLTR, even though other potential suitors (such as DG) are unlikely to emerge given the long time during which FDO was for sale.  Notable that DLTR closed near its lows of the day.  Buyer of 15k of the Jan15 55 puts for 0.25, likely to close.  The Oct 75 calls were also active, trading over 9k at an average price of $1.36.