Tueday’s Notable Options Activity: $CVX, $DNKN, $HAL, $USO, $SLB,

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

1.USO – saw a bearish roll when etf was 17.20, a trader sold 8850 Feb 17/19 put spreads at 1.19 to close and bought 7350 Feb 15/17 put spreads for .68 to open.  Total options volume ran 1.75 average daily volume, with 34,000 of each the Feb 18 and 18.50 puts trading on the day.

2. SLB – company reports Q4 results Tuesday after the close, the options market is implying about a 5% one day move vs the 4 qtr avg move of only about 2.25%.  Yesterday when SLB was $78.50 a trader paid 1.53 for 10,000 of the Jan 78 puts, or about $1.5 million in premium, assuming a hedge into the print.  The stock is down 35% from the 52 week highs, down 10% alone in 2015.  With IV approaching new 52 week highs, if this trade was protection, a collar (selling call against long stock, long put) may be one way to lessen the premium outlay and mitigate some of vol crush that will exist following the event.

3. HAL – saw a trader close part of a bullish long dated view, when the stock was 38.89 there was a seller of 8500 of the Jan16 50/70 call spread at 1.62, there is 30,000 open interest in the 70 strike and 38,000 in the 50 calls....there is likely more to go on this one

4. EBAY – one trader closed a prior bullish view, when stock was 56, a trader sold to close 7500 April 60 calls at 1.25.  Whats interesting to me is that all of the excitement about Carl Icahn’s plan to spin out PayPal has apparently subsided, and for the most part investors seem generally disinterested in EBAY’s core, and surprisingly Apple PAY is already dominating the mobile payments conversation despite PayPal’s obvious existence in the space. It is my view that Google or Microsoft should buy PayPal to compete with their nemesis Apple on mobile payments.

5. AMD – quickly becoming a distressed equity,$2 billion market cap, $938 million in cash and declining, with $2.2 billion in debt on expected 2014 sales of $5.5 billion.  Right out of the gate yesterday a trader paid .17 for 25,000 Feb 2.50 puts to open

6. DNKN – positive commentary from the CEO on CNBC in the morning saw the stock rise almost 6% at one point filling in the earnings gap from mid December.  There was call buying right out of the gate, when stock was 45.21 a trader bought 7,000 June 50 calls for 1.50 to open, and a block of 4,000 March 47.50 calls were bought for 1.25 to open, with 13,400 trading on the day.

THERE WAS A VERY LARGE OVERWRITING PROGRAM, WHERE AN INVESTOR SOLD CALLS AGAINST EXISTING LONG POSITIONS IN AN EFFORT TO CAPTURE YIELD OVER THE NEXT 2 TO 6 MONTHS, HERE WERE A FEW THAT CAUGHT MY EYE:

6.  CVX – when stock was 105.71 a trader sells 24,000 June 120 calls at 1.30 to open. this would add about 1% yield to stock that already has a 4%dividend yield if the stock is below 120 on June expiration, call-away level is $121.30, up about 15%

7. PFE – when the stock was 32.75, a trader sells 90,000 April 35 calls at .32 to open, likely an overwrite, making call away level at 35.32 up about 8% adding 1% yield below 35

8.  MSFT – when stock was 47.51 a trader sold 50,000 March 50 calls at .65, making a call-away level of 50.65, up about 6.5% on March expiration

Other names that large out of the money call selling occurred in yesterday:  JNJ, QCOM, MCD, PPL, TGT, GM, SO & YHOO