Friday’s Notable Options Activity: $DG, $EBAY, $LRCX, $MS, $RICE, $TSO, $VLO

by Dan December 22, 2014 9:17 am • Commentary

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

1. MS – Continues to see out of the money put buyers, short dated for generally low premium.  Last week we highlighted the following flow from Dec 10th:

MS – to reiterate, you never can really know what’s going on in a large block of options without having intimate knowledge of the trade.  When the stock was $37.99 shortly after the opening there was an open buy of 20,000 Dec 20th (next week expiration) 33 strike puts of .06, or $120,000 in premium. These puts have 7 more trading days to break-even down 13%.  Your guess is as good as mine, but obviously the most likely reason would be a disaster hedge for a long position of 200,000 shares.

On Friday when the stock was 38.40 there was a buyer of 20,000 Jan 2nd weekly expiration 35 puts, paying .21 to open, or $420,000 for a bearish bet that pays off below $34.79, down about 9.5%. The stock made a new 52 week high on the day.

2. RICE – a $3.3 billion market cap E&P company sees a bullish roll when stock was 24.35, a trader sells 20,500 of the Jan 25 calls at 1.60 to close and buys 17,500 April 25 calls for 3.70 to open

3. VLO – saw a bearish roll down and out when stock was 48.16, a trader sold 7600 Dec 50 puts at 1.84 and bought 15,200 Jan 47.50 puts for 1.65 to open

4. TSO – saw a bearish roll down and out when stock was 72.82, a trader sold 5k Dec 75 puts at 2.50 to close and bought 13,000 Jan 70 puts for 2.90 to open.

5. XLF – saw some put buying and call selling,. When the etf was 24.72 a trader bought 23,000 March 23 puts for .38 and when etf was 24.74 there was what looked like a closing seller of 8,000 Jan 25 calls at .27 and 8,000 of the Feb 26 calls at .19

6. LRCX – saw large opening put purchase when stock was 80.34, trader paid .80 for 9300 March 67.50/60 put spreads

7. EBAY – looked like a trader rolled an overwrite of long stock, buying back 4200 Dec 55 calls for 2.40 to close and selling 2800 April 62.50 calls at 1.40 to open and 2800 April 60 calls at 2.24 to open.

8. DG – the stock got hit hard on news that the FTC could cause some wrinkles in the their proposed merger with DLTR.  One trader used the downward volatility to make a bullish bet, purchasing a call spread risk reversal.  When the stock was $69.07, a trader sold 10,000 Feb 62.50 puts to buy 10,000 Feb 72,50 / 80 call spreads, paying five cents for the package.  The trade was against a sale of 450,000 shares at $69.07, which could have been a stock replacement strategy.  If it was and the trader was out of the stock position,  the options portion of the trade is profitable between 72.55 and 80 on February expiration with a max gain of 7.45.  The trade losses five cents between 72.55 and 62.50, with losses below the put strike, down 10%.