Here is some untied, generally directional options activity that caught my eye during Monday’s trading:
1. AAPL – saw an opening buyer of a ratio put spread when stock was 118.
There is a fairly epic technical battle taking place in AAPL, right at the prior highs, your guess is as good as mine which way it resolves itself, but I think it is safe to say the smart money is on a near term breakout:
Thirty day at the money implied vol has come down fairly hard as expected since earnings, but remains slightly elevated, most likely a result of the heightened volatility environment. Very soon options prices will start to look very reasonable for those looking to express directional views, but in the meantime yield enhancement strategies may still look attractive for long holders:
2. XOM – saw a similar trade in to the AAPL one detailed above, I suspect the same investor as they were crossed on the same floor with the same broker. When stock was 91.
3. WMB – saw a large bullish roll when the stock was $46.50 a trader sold 48,000 Feb 45 calls to close at 2.45 and rolled up some of the profits by paying 1.08 for 66,000 Feb 48 calls to open. That is closing out nearly $12,000,000 in premium and committing $7 million of it that breaks even up at $49.08, up another 5.5% in less than two weeks. The company is scheduled to report Q4 results February 18th after the close. The options market is already implying about a one day move of which is well above its 4qtr avg move of only 2% and the 8 qtr avg of about 3.5%.
4. MSFT – saw call volume outnumber that of puts but more than 4 to 1 on the day. But the flow wasn’t exactly bullish. When the stock was $42.60 a trader bought to close 54,000 March 50 calls for .02, likely closing an overwrite of long stock, and then sold to open 27,000 May 45 calls at .80 to open, and 28,000 April 45 calls at .44 to open, so probably rolling the call sale down and out. Overwriting is a yield enhancement strategy where a long stock holder sells calls against their position with the idea that the stock will be at or below the strike on expiration and the investor will collect the premium of the calls sold.
5. CSCO – yesterday I took a quick look at the set up into earnings due out Wednesday after the close (read here). My sense is that the 4% one day implied move could prove cheap given some of the post earnings price action in large cap tech. Today when the stock was $27.20 a trader bought to open 20,000 March 28 calls and sold 780,000 shares at 27.20. I suspect this trader is taking a view on vol, that its cheap, but could have also been a stock replacement trade.
6. CA – the mainframe computer software company that is not set to report again until May saw a large opening put purchase when the stock was $32.09, a trader paid 1.50 for 10,000 of the August 30 puts. Coming into the day there was only 54,000 in total open interest with 38,000 calls and 16,000 puts. This one may be worth keeping an eye on for any negative developments.