Monday’s Notable Options Activity: $BIDU, $FEYE, $LULU, $SPLS, $TWTR

by Dan December 9, 2014 9:16 am • Commentary

Here is a list of some untied, generally directional options activity that caught my eye during Monday’s trading:

1. SPLS – for the second consecutive trading day, options volume ran hot in SPLS at more than 3x avg daily volume with the majority of the trading taking place in calls.  When the stock was $14,32 a trader rolled a bullish view out, selling 15,000 Jan 15 calls at .35 to close and buying 20,000 June 15 calls to open for 1.10 making the break-even on this trade at $16.10 (basically at the 52 week high, marked in red below.) As we noted in yesterday’s post, Friday saw accumulation of March and June calls (SPLS – Call volume ran 3x average daily with a buyer of 15,000 March 15 calls for .60 to open, and buyer of the June 15 calls, 18,000 bought to open for .95 to open).

SPLS 2yr chart from Bloomberg
SPLS 2yr chart from Bloomberg

2. BIDU – Despite the recent gains in the Shanghai Composite (excluding last night), Chinese internet stocks and gaming stocks like WYNN and LVS (who are very tied to the Chinese economy have had a very tough couple weeks.  As for BIDU, there was a large bullish trade yesterday where trader bought the Jan16 300/370 call spread 5,000 for 8.60 vs selling 80,000 shares at 226.25, with the shares included (possibly) trying to get better prices on the options structure.

3. TWTR – stock got drilled, down almost 6%, with no real support until the low $30s (possibly as low as $30.)  Call volume dominated the flow, with what looked like opening buying of the Jan 40 calls (14,000 of the Jan 40 calls trading on the day.)  The second most active strike was the Dec 12th weekly 37 puts with almost 9,000 trading on the day.  It is important to note though that call volume was more than 2x that of puts with 170,000 to 73,000.  Short dated implied vol saw a very healthy spike of almost 5 points, with options volume accelerating into the close:

TWTR 2 day chart of 30 day at the  money implied vol from Bloomberg
TWTR 2 day chart of 30 day at the money implied vol from Bloomberg

4.  FEYE – the stock has been banging  along the bottom for what feels like an eternity, hovering around $30 for months with every bounce to the mid $30s having been sold hard.  Unfortunately for bulls on the stock, the technicals look horrid as the stock has made a series of lower highs and lower lows, with what feels like another lower low coming to a theater near you:

FEYE 1yr chart from Bloomberg
FEYE 1yr chart from Bloomberg

The stock opened up out of the gate yesterday on unconfirmed take-over chatter, with Dealreporter.com citing possibly interest in the internet security company from ORCL or IBM.  ORCL reports earnings next week so this chatter could persist into their print.  Call volume ran hot yesterday, nearly 2x average daily volume, with the most active strike the March 30 calls, with the largest block of the day a buy of 1200 of the March 30 calls for 4.00 when the stock was $30.70.  With short dated implied vol at about 51%, the options market is implying daily moves of about 3%, which it has easily been realizing. The chart below shows the pick up in realized vol (how much the stock is moving in white) vs the price of options (implied vol in blue):

From Bloomberg
From Bloomberg

5. LULU – the company reports their fiscal Q3 results on Thursday prior to the open, the options market is implying a one day move of about 10% in either direction, vs the 4 qtr average move of about 12%.  Call volume ran hot yesterday at about 3x that of puts, and when stock was 45.29 a trader paid $4.35 for 1200 of the March 45 calls to open ($500k in premium), breakeven on the upside is $49.35 up about 10%, and the stop out on the downside is just above what looks like important technical support at $40:

LULU ytd chart from Bloomberg
LULU ytd chart from Bloomberg

I detailed last night on CNBC’s Fast Money: