Thursday’s Notable Options Activity: $DAR, $GLD, $JPM, $XOM, $XOP, $ZNGA

by Dan February 27, 2015 7:07 am • Commentary

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

1. JPM – total options volume ran 1.5x avg daily volume with calls dominating, making up 85% of the days volume.  There were two bullish rolls that that were responsible for a good bit of the activity. First when the stock was 61.38 shortly after the open, a trader sold to close 8,000 March 60 calls at 1.94 to close and bought 8,000 March 62 calls for .76 to open. And shortly after 1pm when the stock was $61.60 a trader sold to 17,500 March 13th weekly 60.50 calls at 1.54 to close and bought 20,000 March weekly 62 calls for .68 to open.  On March 5th and 11th the Fed will release findings of their stress tests.  These traders don’t appear to be worried about the results for JPM as they are likely rolling up their bullish views.

2. GLD – total options volume ran 1.3x avg daily volume with calls trading 4x that of puts.  Apparently traders were rolling down strikes in the near term and looking for relatively low premium was to play for a big bounce by the end of the summer.  First in the morning when the etf was $116 a trader sold 13,000 March 129 calls at .045 to close,  sold 7,000 April 130 calls at .19 to close and bought 10,000 April 125 calls for .50 to open. These break-even at $125.50 up 8% in less than 2 months.  Also in the afternoon when the etf was $116.35 a trader paid .50 for 20,000 Sept 150 calls which break-even at $150.50 up about 30% on Sept expiration.

A quick look at the five chart of GLD shows that a break-even of the $125.50 (red level) level for the April trade seems achievable under the right set of circumstances as this was a level the etf was trading a little more than a month ago.  But the Sept trade with a break-even at the breakdown level from 2013 seems like it is a bit of a “black swan” trade, meaning a hedge against a broad market decline:

GLD 5 yr chart from Bloomberg
GLD 5 yr chart from Bloomberg

3. XOM – on a day that saw crude oil take in the chin with brent down 2% and wti down 4%, one investor made a chunky purchase of near dated out of the money calls tied to stock on an 18 delta. The trader paid .41 for 24,000 March 92 calls and sold 430,000 shares of stock at $88.55.  The company is holding an analyst meeting next Wednesday March 4th (here).

4. XOP – the S&P Oil E&P etf saw a decent roll up of strikes and extension of a bearish or protective view when the etf was 51.60. A trader sold to close 19,000 March 43 puts at .15, and bought 9500 April 46 puts for 1.06 to open

5. DAR – here is a stock that I have never heard of, Darling Ingredients. When the stock was 17.38 a trader paid .45 for 20,000 of the March 17 puts to open and sold 20,000 of the July 15 puts at .25 to open.  Coming into the day, the stock had only 88,000 in total options open interest, with most in puts, 45,000 of the Oct 14 puts and 30,000 of the April 17 puts. The company is scheduled to report Q4 results Wednesday after the close.

6. ZNGA – saw a massive roll down in calls when the stock was 2.34. A trader sold 70,000 Jan16 3 calls at  .26 to close and bought 57,000 Jan16 2.5 calls for .42 to open. Two weeks ago the stock declined 15% in one day after issuing an earnings and sales miss.  With a $2 billion market cap, trading at 3x sales and half their market cap in cash and no debt, the stock is a call option at $2.30.  I see little reason to play a stock like this with options in this sort of size, crossing bid ask and paying high commissions especially if you are willing to add more deltas on a decline in the stock as the trader did on Thursday.