Here is some untied, generally directional options activity that caught my eye during Thursday’s trading:
1. BABA – when the stock was 110.10, a trader paid 3.83 for 20,000 of the March 120/140 call spread to open vs selling 460,000 shares. Call volume outnumbered puts almost 3 to 1 on the day.
2. FEYE – the stock had its largest gain in months as investors moved aggressively into high short interest tech stocks, but also likely buoyed by commentary from ORCL regarding enterprise security. When the stock was $29.76 a trader paid 2.00 for 4,000 of the June 35/45 call spread to open, 6300 ended up trading on the day with total options volume 3x average daily volume. The stock is down 30% on the year, and 68% from the all time highs made in March. With 18% short interest, the stock could act like a coiled spring on the slightest bit of better than expected news with no overhead resistance for another 20%:
3.MCD – total options volume ran almost 2.5x average daily, with calls outnumbering puts more than 5 to 1. The most active strike was the Jan 95 calls, with 48,000 trading on the day. When the stock was $92 shortly after the open there was a block of 38,000 for 1.41.
4. EMC – options volume ran 3x average daily volume, with calls dominating the flow. The most active strike was the Feb 29 calls, where 10,000 were bought for about 1.46 when the stock was around $29.35. Large cap tech had an obvious bid with ORCL’s 10% surge following better than expected results and commentary and traders may be looking for cheap stock’s that have yet to breakout.
5. GRPN – the stock has rallied 15% in the last three days, but still down 33% on the year. On CNBC Wednesday, hedge fund investor Leon Cooperman stated that he had a small position in the stock and that it could be 50% undervalued. Options volume ran 3x average daily volume, with the most active strike the Jan 8 calls with 9000 trading, followed by 5500 of the Jan 7 calls.
6. VIX – the fear index declined more than 30% in two trading days as the S&P500 has gained more than 5% from the lows. There appeared to be a large unwind of a leveraged bullish Risk Reversal where a trader bought to close 100,000 Jan 15 puts and sold to close 100,000 Jan 20 calls. Given the asymmetric risk in the VIX (10ish is generally as low as it can get while upside is somewhat unlimited) calls are much more expensive than puts and traders often look to finance the purchase of calls or call spreads by selling downside puts, which is why this trade looks to be the closing of a prior bullish bet.
7. TGT – the stock closed at a new all time highs and options traders were looking for continued gains. Options volume ran 3x average daily, with calls outnumbering puts 4 to 1. There were two bullish opening blocks of calls that caught my eye, a buy of 12,000 April 85 calls when the stock was 74.57, and a buy of 10,000 April 77.50 calls for 2.35 when the stock was 74.16. Yesterday, I outlined a scenario where I would look to take the other side of this optimism (read here: Name That Trade – $TGT Shooting)