Tuesday’s Notable Options Activity: $AABV, $TSCO, $VZ

by Dan February 18, 2015 8:06 am • Commentary

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

1. VZ – one trader expressing a view that short dated options are cheap, and that the stock could move more than 2.5% over the next month in either direction.  When the stock was $49.05 a trader bought 30,000 of the March 49/50 Strangle for 1.26 to open. This position has a small delta of about -15. So to break-even on March expiration if bought outright (and not hedged as the stock moved) would need a move above 51.26, or below 47.74 to make money. Implied vol is down recently but not at historically low levels. Although the implied vol (red) is a bit lower than realized vol (blue) and this trader is betting on either continued movement outside the range or an increase in implied vol of both:

Screen Shot 2015-02-17 at 8.46.33 PM
2 yr IV30 vs HV30 in VZ

2.  TSCO – Tractor Supply Company saw bullish activity. When stock was 84.62 a trader paid 1.60 for 3,000 of the March 85/90 call spread to open. This is a a fairly odd choice as the spread is tight and the max gain is 2x the premium at risk. And the choice of March expiration is odd as the company is not expected to report again until April 22nd. So if this is a breakout play, why limit the upside?   Last year TSCO had an analyst meeting on Feb 25th, but a date does not look similarly scheduled on their investor relations site.

3. ABBV – when the stock was $58.10 a trader bought to open the Apr 2nd weekly 54.5 / 57 1 x2 put spread 4800 x 9600x for even money. If the stock is between 57.50 and 52 the trader can make up to 2.50, with the max gain of 2.50 at 54 on April 2nd weekly expiration. Losses begin below 52.  This trade could be cheap near term protection against a long stock position, or an outright bearish play with a area below where the trader is willing to be long delta/put the stock.