Thursday’s Notable Options Activity: $SPY, $VIX, $HYG, $FB, $QEP, $EMC

by Enis October 17, 2014 7:15 am • Commentary

Intraday volatility continued in the S&P 500 index, as the index had a range of nearly 50 points for the second straight day.  However, the index closed near unchanged, and options volumes were more subdued, though stock volumes were still the second highest of the year.

1.  SPY – Only about 3.4 million puts traded yesterday vs. over 5 million on Wednesday.  Implied volatility edged back from a 2 year high.  The weekly 185 and 184 puts traded over 150k total on the day.  For expiration today, the 190 puts have over 270k of open interest, and the 188, 187, 186, 185, and 183 puts all have over 100k of open interest among near-the-money strikes.

2.  VIX – VIX calls traded over 1 million on the day for the third straight session.  The Dec 29 calls were the most active line, trading over 87k at an average price of 1.78.  VIX spot has closed above 22 (the prior 2 year high) on each day this week.

3.  HYG – Someone traded the Dec 83 / 92 risk reversal for even money, selling put and buying call, 35k times.  Interesting thing about this trade is that it’s even money, even though the put is $8 away, and the call is only $1 away.  A good illustration of extreme skew in high yield bonds, where potential downside is viewed as much greater than potential upside.  This trade took advantage of that skew for a bullish risk reversal.

4.  FB – Facebook closed at its lowest level in 2 months, though the stock is still up 33% year-to-date.  In the morning, someone sold 45,000 of the Nov 77.5 calls at 2.10 vs. buying stock for 71.05 delta neutral.  FB’s high of the year is $79.71.  The company reports earnings on October 28th.

5.  QEP – The stock declined more than 40% peak to trough from early September to this week.  JANA Partners, who had been pushing for an asset sale, disclosed on Wednesday that it had exited its full stake in the company.  There was a large 4 way option trade:  around 23k of the Dec 29 put trades at 5.625, looks like selling to close; around 22k of the Dec 22 put trades for 1.57, looks like buying to open; around 32k of the Dec 27 call trades for 0.69, looks like buying to open; around 19k of the Dec 32 calls trades at 0.10, looks like selling to open.

6.  EMC – Buyer to close of the Jan15 / Apr 31 call calendar, paying $0.415.  EMC has fallen about 11% from its high just above $30 in late September.