Too Many Options: $SPY, $AAPL, $EBAY, $TWTR, $WFC, $CHS

by Enis August 29, 2014 6:05 am • Commentary

The CBOE composite put/call ratio closed at 1.30, its highest level since October 2013, and the large skew towards puts was entirely due to one large trade in SPY, in an otherwise quiet day.

1.  SPY – Buyer of 100k x 200k x 100k of the Sept20th 196/193/190 put butterfly for $0.22 to open.  That trade has a break-even range of $190.22 to $195.78, and the max gain of $2.78 if SPY closes at $193 on Sept20th expiration (quite a low probability of course).  This week has been the lowest volume non-holiday week in SPY since 2006.

2.  AAPL – Second-largest single day stock volume in AAPL in the past month as traders were excited by the official announcement of the Sept 9th iPhone 6 launch party.  Stock hit a new all-time high, and options were active.  The Nov 110 conversion traded 50k times and the Oct18th 110 conversion traded 37k times, in what is likely a bank locking in funding as part of an accelerated buyback for AAPL (see our post from February for more details of how that works).  Outside of weekly options, the Oct18th 101.43 calls also traded 47k on the session.  Part of that looks like a trader rolling up, selling around 20k of the Oct18th 95 calls to buy 27k of the Oct18th 101.43 calls.

3.  EBAY – A lot of speculation yesterday that the iPhone 6 could accommodate mobile payments (see this article from Business Insider).  As a result, some traders were nervous about the potential impact to PayPal, and the Sept12th expiration puts that capture the iPhone 6 event were very active in EBAY yesterday.  Buyer of 11,500 of the Sept12th 54 puts for 0.37 to open in the morning.  The Sept12th 55 and Sept12th 55.50 puts also traded over 7k on the session.

4.  TWTR – Options traded more than 2.5x the daily average, as touched its highest level since late March.  The Sept20th 50 calls were the most active line, trading over 16k at an average price of $1.75 on the day.

5.  WFC – Seller of 30k of the Sept20th 50 puts at 0.20 to open.  A bit of a bizarre trade in that the put seller can only collect up to 0.20 for the position, but it’s likely from someone who is willing and able to buy WFC stock below $50 if it gets there.  The rising 200 day moving average in WFC, which has not been touched since late 2012, is now around $48.30.

6.  CHS – Big reversal higher in CHS yesterday after a weak reaction to earnings on Wednesday.  The Oct 17 calls traded nearly 20k on the session at an average price of 0.38.  CHS has been rejected near the $17 on several occasions this year.  The stock is still down 15% year-to-date.