Here is some untied, generally directional options activity that caught my eye during Friday’s trading:
1. VIX – the index closed at its highest level since October 20th (when the S&P500 was 100 points lower than current levels.) Options volume exploded, trading about 3x the average over the last four weeks, with calls outnumbering puts more than two to one. There appeared to be one trader rolling a call position in Dec which expires Wednesday morning, prior to the Fed’s rate announcement. About an hour after the open, when the index was $19.65 there was a closing seller of 100,000 Dec 20 calls at about 1.22, and rolling out to Jan buying 100,000 of the Jan 20 / 30 call spreads for 1.57 to open. By the end of the day, 140,000 of the Jan 20 calls traded while 133,000 of the Jan 30 calls traded.
2. HYG – options volume ran 2x average daily as the high yield bond etf made its lowest close since May 2012. The two most active strikes were the Dec 87 and 86.50 puts, with 8,000 and 6,000 trading respectively. Probably the most interesting trade was a buy of 5,000 Match 82 puts to open for .72 when the etf was $87.62 (was tied to stock on a 26 delta), which could merely be a vol play but given the out of the money strike maybe directional. The index is clearly traded with the falling price of crude as almost 20% of high yield corporate debt issuance is in the energy space so maybe this trader thinks vol goes much higher, as it is now approaching two year highs. Or maybe it was merely a directional trade which the trader plans to scalp stock against.
3. TLT – traded more than 2x average daily volume with the most active strike the Feb 123 puts with 10,000 contracts trading in two separate blocks of 5,000. When the etf was 124,69 there was an opening buy of 5,000 for 1.93 and when the etf was 123.36 there was a buy of 5,000 for 2.09. Next Wednesday’s FOMC meeting starting to feel like the main event for the balance of the year.
4. CY – less than two weeks ago the company announced its intent to merge with Spansion, sending both stocks up considerably, CY up some 35% closing Friday at new 2 year highs at $13.63, but well below the five year highs made at $24 in 2011. At least one trader sees the strength continuing. When the stock was $13.47 shortly before noon there was an opening purchase of 24,000 Jan 14 calls for .45.
5. JD – looked like a roll down and out when the stock was $24.16. A trader sold 11,000 Dec 25 puts at 1.20 close and bought 11,000 Jan 23 puts for 1.20 to open. Likely a block of protective puts.
6. KO – the stock is down 9% in what looks like a straight line, and now down on the year by about 1%. The options activity on Friday was pretty curious with what was being reported as an opening sale of 25,700 of the Feb 36 puts at .14, Why is this curious? Well, plain and simple it doesn’t really seem like a great risk reward to try to capture about $360,000 in premium if the stock is above $36 on February expiration. The delta on this option was about 8, as a general rule of thumb when it comes to opening sales of options, against an underlying stock position or even as part of a spread it is generally not a great habit of selling options with less than a 10 delta, especially naked. I suspect that this was opening disaster protection for a long stock position that was bought but merely mis-reported.
7. WY – when stock was $36.07 it looked like a trader rolled an overwrite vs long stock up and out, buying back 5300 Dec 34 calls for 2.16 to close and selling 8600 Jan 36 calls at .80 to open.
8. CMCSA – When the stock was $55.55 shortly before noon it looked like a trader bought a bullish risk reversal looking out to July expiration, selling 5,000 of the July 50 puts at 2.05 and buying 5,000 July 60 calls for 2.05. This trade cost no premium and breaks even on the upside at $60, and losses below $50 on July expiration. On a mark to market basis this trade would suffer losses as the stock moves lower towards the short put strike but also possibly register gains as the stock gained towards the long call strike.
9. SAVE – since the opening tick on Monday morning when the stock made a new all time high, the stock closed down 20% on the week after reporting disappointing November traffic results. The stock is still up 50% on the year. It looked like a long holder rolled down an overwrite when the stock was $68.80, 2500 Jan 75 calls were bought to close for 2.00 and 4800 Jan 70 calls were sold to open 3.20.
10. XLF – It appeared there was a bearish roll where a trader sold to close 38,600 Jan 21 puts at .05 to close and bought 32,000 June 21 puts for .40 to open when the stock was $24.39, down about 1% on the day.
Read my trade from Friday on the XLF (here) and my description on CNBC’s Options Action Friday Dec 12th, 2014: