Tuesday’s Notable Options Activity: $SPY, $VIX, $HYG, $AAPL, $BABA

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

1. SPY – options volumes exploded yesterday, with total volume 1.7x the week average. Puts outnumbered calls by 1 million contracts (2.36 mil to 1.36 mil).  Shortly after the open, when the etf was around $199, there was a bearish roll where a trader sold to close 90,000 Jan 200 puts to close at $5.13 and bought to open 135,000 Jan 196 puts for 3.55.  Put another way, the trader rolled out of a put position worth $46 million into a much larger position at a lower strike worth $48 million.

Despite the S&P500 more than 100 points off of the October lows, the one year chart below of 30 day at the money implied vol (the price of SPY options- blue below) vs the 30 day at the money realized vol (how much the SPY has actually moved- white below) shows the heightened level of fear with the growing spread between implied and realized and its quick approach to the October highs, despite just a 5% decline in the index:

2. VIX – options volume ran hot at almost 3x average daily with calls outnumbering puts 2.5x to 1.  That was despite the fact that it was hard to know what was going on in vol as the spot VIX was all over the place due to some data errors. The most active strike was the Jan 30 calls, with 96,000 trading.  Most of the days volume took place in Jan expiration calls, as one would expect the day prior to December VIX expiration (this morning).

3. USO – options volume ran 2x average daily with puts outnumbering calls by a ratio of 1.6 to 1. Shortly after the open there appeared to be a bearish roll down in puts when the etf was $20.84, there was a seller of 12,000 of the Feb 24/18 put spread to close at 3.00 and an opening buy of 24,000 Feb 21 puts for 1.82.

4. HYG – options volume ran 2.2x average with generally mixed flow.  One bullish trade caught my attention when the etf was $86.63 a trader paid .65 for 10,000 Jan 88 calls to open.

5. BABA – when stock was 107, a trader bought 10,000 of the July 50 puts for .25 to open, $57 out of the money.  Your guess is as good as mine on why. It looks more like a $250,000 lotto ticket than real protection against a long stock position.  Remember that the September IPO price was $68, and it never sniffed that level, with the all time low in the stock in the low $80s.   ¯\_(ツ)_/¯

6. AAPL – the stock is down about 11% since almost touching $120 in late November.  When the stock was $109, a trader paid .31 for 25,000 Jan 90 puts.  This appears to be closing, not a new bearish bet.

 7. XOM – despite closing at a new 52 week low, call volume ran hot, nearly 1.5x that of puts, with a large call buyer paying up to 1.23 for 15,000 Jan 92.50 calls when the stock was $88.90