Monday’s Notable Options Activity: $APC, $HYG, $RSX, $USO

by Dan December 16, 2014 7:58 am • Commentary

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

1. USO – crude oil continues its putrid performance with crude futures having its worst day in more than 2 weeks closing, down 4.5%  after being up on the day prior to 10am this morning.  Options volume exploded today in the USO etf that tracks the price of WTI, with total volume more than 1.5x average daily volume.  When the etf was $21.90,  a trader took a bullish view, selling 13,000 March 19 puts at .75 to open and buying 13,000 March 25 calls for .75, this trade loses below 19 and profits above 25 on march expiration with mark to market losses closer to the short put strike and gains as the stock nears the long call strike.  When the etf was $21.61 there was a closer sell of a bearish trade, 10,000 of the February 26.50 / 23  put spread was sold to close at 2.65, or about 75% of the width of the spread.

2. APC – when the stock was 72.75, a trader sold 2500 May 60 and 65 puts at 3.20 and 4.85 respectively and bought 2500 of the May 82.50 and 90 calls for 5.05 and 3.05 respectively, that’s what you would call a bullish risk reversal.  Total options volume was about 1.7x the week average.  The stock of course closed at a new 52 week low, down only 9% on the year, but down 36% from the all time high made in September.

3. HYG – the high yield debt market continued to be on edge with the 4% plus decline in crude. HYG made a new 52 week closing low despite making up some ground from the morning lows.  Options volume ran 3x avg daily, but after what has seemed like endless bearish flow there was a large bullish 3 way trade that went up shortly after 1pm. When the etf was $87 a trader sold 10,000 Jan30th weekly 85 puts at 1.30 to open and bought 10,000 of the Jan 30th weekly 88.50 / 91 call spread for .50, the whole package was down for an .80 credit.  If the etf is between 85 and 88.50 the trader collects .80, or $800,000.  Losses commence on the downside at $84.20, with a max potential gain of .80 from the credit plus up to an additional $2.50, or $2.50 million if the stock is between $88.50 and $91 on Jan 30th weekly expiration.

4. RSX – seeing opening put buying with the Russian equity etf down 11% on the day making new 6 year lows. 25,000 Dec 11 puts are bought for .10 to open when etf was 14.02,and 25,000 Dec 12 puts were bought for .15 when etf was 13.86. total options volume ran 6x avg daily volume with the puts outnumbering calls 140,000 to 29,000.  Some fairly nice timing in front of last night’s surprise interest rate hike from Russia’s central bank from 10.5% to 17%, which has sent the ruble crashing to new lows against the dollar (not the intended consequence) and Russian equities down another 5%.

5. MET – when stock was 51.65, a trader sold 10,000 Feb 57.50 calls at .45 to close and bought 10,000 March 57.50 calls for .75 to open, this looked like a bullish roll of out of the money calls.

6. PAY – The stock is up 23% ytd, and seen as a beneficiary of the trend towards mobile payments.  In front of last night’s 4q results there was some hefty options activity, particularly in calls where it appeared a to be an aggressive seller of the Jan 36 calls trading to open with the largest block of the 25,000 that traded on the day being 8600 at 70 cents when the stock was 33.45.  I suspect this was an overwrite making the call away level at $36.70 on Jan expiration, up about 10%