Friday’s Notable Options Activity: $SPY, $DAL, $PBR, $LAMR, $RIG

by Enis October 20, 2014 6:30 am • Commentary

While the market was very volatile intraday, a market observer looking at only the daily closes for the S&P 500 index would not have thought it an unusual week:  Monday -1.6%, Tuesday +0.2%, Wednesday -0.7%, Thursday -0.1%, and Friday +1.2%.

It was still the lowest weekly close since May, and the highest volume week since 2011.

1.  SPY – Weekly options on October expiration were most of the volume, but are now expired or exercised.  Outside of Oct, the most active line was the Nov 193 call, which traded over 73k at an average price of $1.89, mostly seller to open in the afternoon.  The $190 level is important resistance, and $182 is important support in SPY.  The Volume Weighted Average Price (VWAP) for SPY last week was $187.02.

2.  DAL – Amidst the Ebola headlines, DAL actually ended up on the week.  The Dec 40/43 1×2 call spread traded 40k x 80k for around 0.09 in the morning.  That’s a good risk/reward structure for someone looking for a cheap way to add upside leverage into the end of the year, particularly for someone already long stock.  DAL’s high of the year is $42.66.

3.  PBR – Buyer of 70k of the Nov 20/22 call spread for 0.36.  PBR implied volatility remains very elevated (the break-even on that call spread is $20.36, more than 30% higher than the stock’s current level), mainly in expectation of a big move after the Oct. 26th election result.

4.  LAMR – Looks like a trader collaring some stock after this week’s volatility.  The Jan15 52.5 calls traded over 23k at an average price of 0.60, sold to open, and the Nov 45 put traded over 18k at an average price of 1.01, bought to open.  This protection structure implies that the trader expects any incremental weakness in LAMR to likely be in the next month.

5.  RIG – Even though the energy sector as a whole bounced, RIG still closed down 4.5%, near its low of the week.  The May 26 puts traded 20k for 2.475.  RIG has not traded more than 1% below the $26 level since 1995.