Here is some untied, generally directional options activity that caught my eye during Thursday’s trading:
1. FEYE – after being very much out of favor in 2014, closing down 70% from the highs, the stock appears to be attempting to put in a little bottom in the last month, up 20% from the December lows. Options volume ran hot today at almost 2x average daily volume, with calls outnumbering puts 2 to 1. The stock saw a very bullish options trade in the form of a call spread risk reversal in Jan2016 expiration. When stock was 31.
2. MCD – stock had a massive day, up 5% following news that their CEO was stepping down. Total options volume ran 5x average daily, with calls outnumbering puts 6 to 1. When the stock was was 91.
when stock was 93.43 early in the trading session a trader rolled a bullish view, selling 35,000 Jan 95 calls at .90 to close and bought 35,000 Feb 95 calls for 2.27 to open.
I suspect the Jan calls had been bought when the stock was higher, thus resulting in a loss, and you can see that the Feb calls were sold at a $1.95 loss, or $6,825,000. Now the trader is risking an additional $3,367,000 in premium that the stock will be over $95.91 on March expiration. Who knows, this trade could be to protect a short position, or leverage a long, but as usual it is very hard to delineate unusual options activity without knowing the investors intent.
3. ADT – just before the close, the security services company that does not have a ton of open interest and has averaged 2,000 options contracts a day for the last month saw a flurry of call buying out in April. When the stock was around $34.85 a trader paid .25 for 15,000 Apr 43 calls to open, 27,000 ended up trading on the day, making the strike the single largest line of open interest. Coming into the day there was only 51,000 total open interest, evenly split between calls and puts. The company reported their fiscal Q1 Wednesday after the close and registered a beat. What’s interesting to me about this call purchase is that the options are only a 10 delta, so not likely a stock replacement as they have a generally low probability of being in the money without some sort of corporate action, yet the break-even up 24% is a t level where the stock was trading in late 2013, down from a high of $50. Oh and one last point, the stock has short interest of about 23%, while the top 5 holders own about 40% of the shares outstanding. A pretty interesting set up if there ever was a good reason for the shares to rise, they could rise quickly in a straight line.