Thursday’s Notable Options Activity: $AAPL, $IYR, $XLE, $S, $WLT, $KORS, $ADSK

by Enis September 12, 2014 6:30 am • Commentary

Apple continues to be the focus of the options market this week.  Outside of the market’s largest stock, sector ETFs and a few single names had big prints.

1.  AAPL – Interesting roll in AAPL, as the trader looks to buy more time for a bullish view:  trader 44k Sept20th 104 calls at .19 to close and buys 12k Sept26th 103 calls for 0.95 to open.  AAPL was unable to break above the $103.74 high so far this week, but the stock did hold above its 50 day moving average of $97.50 on a closing basis.  Those are the two key technical levels in the short-term.

It’s also interesting to note that while implied volatility (the price of options) on a near dated basis have come in fairly hard since the iPhone event Tuesday, prices still remain elevated, as investors will be looking for the standard update of first weekend sales following next Friday’s Sept 19th launch.  The chart below of 1yr 30 day at the money IV (blue) vs actual volatility in the stock (white) shows the decline in prices, and the increase in movement.  If those two were to converge options prices could be perceived as reasonably priced, but for now short premium strategies like overwriting and range trades probably make the most sense:

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2.  IYR – Aggressive buyer of the Sept20th 72.50 puts, paying 0.33 for 17,889, and then paying $0.44 for 15,313, both in the first hour of the trading session.  This buyer might be anticipating a more hawkish stance by the FOMC in next week’s meeting.  The last significant decline for the REITs sector was after Bernanke’s taper mention in May 2013, after which IYR fell nearly 20% over the next month.

3.  XLE – Dan discussed the weakness in the energy sector in yesterday’s MorningWord.  That underperformance has been accompanied by heavy put trading in XLE.  Another put roll yesterday when the etf was trading 94.06 – a trader sold 25k of the Oct 95 puts at 2.62 to buy 25k of the Nov 92 puts for 2.07, collecting 0.55 for the roll.    XLE closed right at the important $95 technical level.

4.  S – The stock has rallied 13% in the past 2 days as investors were enthused by comments from new CEO Marcelo Claure, including that the company remains open to M&A and is focused on cost cuts and competitive actions to regain share (such as its iPhone for Life plan announced this week).  Calls and puts were nearly equally active.  The Oct 6 puts were the most active line, in what was mostly seller initiated, trading nearly 50k at an average price of $0.235.

5.  WLT – Buyer of 52k of the Oct24th 4.5 call for $0.25 to open, and seller of 52k of the Sept26th 5.5 call at $0.03 to close, paying $0.22 for the package.  That trade looks like a trader rolling down a long call position from the 5.5 strike to the 4.5 strike, and going out one month in maturity.  WLT hit a new 10 year low yesterday.

6.  KORS – Trader sold 1500 of the Jan16 55 puts and bought 1500 of the Jan16 82.50/100 call spreads, paying 2.10 to open.  That trade breaks-even at 84.60, with max gain at 100 of 15.40.  KORS is down 7% year-to-date.

7.  ADSK – Buyer of 5k x 10k x 5k of the Oct 55/60/65 call butterfly for $0.75.  $55 is a pivotal technical level for ADSK, and the all-time high is $58.68 from February.