Options volumes were much lighter on Monday after last week’s hectic trading. Both the SPX and the Nasdaq turned lower near their 50 day moving averages.
1. FB – Facebook closed the WhatsApp deal yesterday, which could lead to potential new supply in the stock. Facebook awarded 177.8 million unrestricted stock to WhatsApp shareholders, which is about 9% of Facebook’s current float, or more than $17 billion worth of stock. Even a portion of that for sale could be a headwind for FB shares in the short-term, if the WhatsApp shareholders decide to sell some of this shares. However, FB options volume was lighter than usual yesterday.
There was one trade that stood out. Shortly after the open, when FB was 77.32, a trader sold 6,000 of the Oct 2015 82.50 calls at 8.85 and bought to close 5,000 of the Oct 2014 80 calls for 0.49. This is likely a roll on an overwrite against a long position. The trade is a yield enhancement trade. If the stock is below 82.50 on Oct 2015 expiration, one year from now, the trader will take in an added 11.5% of yield, with a call-away level for the stock of 91.35, up 18%. This sort of overwrite position makes particular sense over the next few months considering the possible overhang from the new shares that could be for sale from WhatsApp shareholders and employees.
2. ELNK – Trader sold to close 35k of the Jan15 3.5 calls at $0.15, which were originally purchased around $0.65 in early September. ELNK is tech bubble residue that is now only a $350 million market cap name.
3. XLP – Trader sold 20,
4. PBR – The stock bounced back hard, up 13%, on the Brazilian election result after a month of severe selling. The Nov 20 call was the most active line, trading over 30k at an average price of $0.88, mostly buyer initiated. The run-off election is on October 26.
5. SNSS – Biotech stock that fell 78% after its drug trial did not reach its primary endpoint. The Oct 5 puts traded over 20k at an average price of $3.04, mostly selling to close.
6. PWE – Buyer of over 17k of the Mar 6 puts for an average price of $0.85 throughout the day. Penn West Petroleum has declined to a 10 year low in the past month, and is now only a $3 billion market cap company.