Too Many Options: $XLF, $YHOO, $BRCM, $S, $GT, $GLD

by Enis July 31, 2014 6:31 am • Commentary

CBOE composite put/call ratio closed at 0.97 as put activity picked up in the macro ETFs.  Single stock options activity was focused in the technology sector.

1.  XLF – Trader bought 200k of the Aug16th 21/19 put spreads for 0.02 to open.  XLF last traded below $22 in mid-May, and the 200 day moving average in XLF is $21.83.  The financials ETF has been unable to break above the July 3rd high of $23.07 over the past month.

2.  YHOO – Stock hit a one month high, and calls traded over 2x the average 1 month volume.  Buyer of 20k of the Sept 40/45 call spreads for 0.55 around 10:00 am EDT.  In addition, there was an aggressive buyer of the Aug16th 36 calls around 11 am, paying an average price of 1.25 for around 20k.  30 day implied volatility jumped nearly 2 points.  The Alibaba IPO is expected in September, as outlined last week by the WSJ, and Sept20th expiration implied volatility is around 38.50, vs. around 31.50 for Aug16th expiration.

3.  BRCM – BRCM is up 28% year-to-date, with its announcement of a plan to wind down or sell its cellular baseband unit in early June a big driver of the gains.  Buyer of over 30k of the Aug16th 41 calls for an average price of 0.136 shortly after the open.  Looks like a buyer to close after initiating an overwrite around 0.55 in early June.

4.  S – While Sprint reported a slight quarterly profit, the company still lost 245,000 subscribers, indicating its struggle to compete.  Management suggested that more price cuts would be necessary to stop the customer decline.  Stock closed near a 6 month low.  There was a seller of 31k of the Aug16th 8 puts at 0.20 to close in the morning.

5.  GT – Goodyear fell 8% on its earnings report after lowered guidance and a slight miss on Q2 revenues, despite a one penny beat on EPS.  GS Research (which has a conviction buy on GT) summarized the possible reasons for the lowered full year guidance:

We believe the lowered guide is fully explained by a mix shift to passenger car tires vs. commercial vehicle and OTR tires, driving a lower tailwind from raw materials and not from incremental pricing pressure. Additionally, we see the lower guide for price/mix less raw materials being more than offset by higher volumes (2Q14 saw share gains in NA and increased industry shipment guidance) and better than expected cost performance (pension, Amiens closure, cost savings measures). As a result, our net numbers for 2014 remain unchanged.

Call options were active, with a trader rolling down the Oct 29 and Oct 30 calls (selling 11k each at 0.27 and 0.17 respectively), and buying 25k of the Oct 28 calls for 0.53 to open.  GT remained above its 200 day ma, which is around $24.96.

6.  GLD – Buyer of 25k of the Oct 140 / 150 call spread for 0.21.  GLD has remained rangebound between $119 and $129 for the past 4 months, and has not traded above $140 since May 2013.