Friday’s Notable Options Activity: $BAC, $EEM, $GE, $SNDK, $YUM

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

1. GE – The largest trade on the day across single stock, etf and index options was a long dated bullish trade in GE.  When the stock was $25.93 a trader paid .52 for 125,000 of the Jan2017 30 /35 call spread to open, spending $6.5 million in premium for long exposure in between $30.52 and $35 on Jan 2017 expiration with a break-even up 18%, and a max gain of $4.48 (17.5% of the underlying stock price) or about $56 million if the stock is $35 or higher, up 35%.

I suspect this trade was to add leverage for an investor with an existing long position, as the spread offers a 10 to 1 pay out in a stock that is not particularly known for dramatic movement.

I went into greater detail here: Name That Trade – $GE: Electric Boogaloo & discussed on Friday’s Options Action on CNBC:

2. YUM –  Last week I highlighted the purchase of a March call spread purchase in YUM, from Feb 19th: buyer of 5,000 March 82.50/85 call spreads for .15 to open. On Friday morning when the stock was 80.27 a trader sold this call spread at .45 to close for a $150,000 gain in a week, while only a fraction of the potential profit of the call spread it sure beats a sharp stick in the eye. YUM also saw bullish roll in short dated calls, trader sold 4,000 of the March 77.50 calls to close at 4.80 and bought 4,000 of the March 80.50 calls for 2.44 to open.  And the whopper was shortly after 3pm when the stock was $81.43, 18,000 of the Match 82.50 / 85 call spreads were sold to open at 80 cents. These were reported sold, but it just seems a bit odd after two weeks of upside call purchases that a trader would express a bearish view in this sort of size by selling a call spread.  

3. EEM – total options volume ran more than 2x average daily with puts outnumbering calls 300,000 to 190,000.  Most of that volume came one trade when the etf was 40.90, a trader sold to close 83,000 June 30 puts at .09 to close and bought 95,000 Sept 30 puts for .30 to open.  These puts break-even down 27% at $29.70, I suspect they are nothing more than crash protection on a basket of emerging market stocks.

4. BAC – the stock was downgraded by UBS lowering their 12 month price target from $20 to $16, suggesting that the bank could fail the Fed’s stress tests as results should be issued in the next 2 weeks. Total options volume ran 2.5x average daily with calls vastly outnumbering puts 425,000 to 175,000.  The largest trade on the day was a buy 30,700 March 13th weekly 16.50 calls for 13 cents, these were marked closing though, and a trader could have been closing an overwrite against long stock as there is 100,000 open interest in the strike.

5. SNDK – total options volume ran almost 3x average daily volume with calls making up 75% of the total.  The most active strike was the March 6th weekly (this coming Friday) 79 calls, with 5,000 trading on the day.  The largest block on the day was a buy of 2500 of them for 1.15 to open when the stock was $78.90 shortly after the open.  A look at Friday’s intra-day chart of SNDK shows exactly where these weekly at the money calls were bought (circled in green).  The point of the chart is to highlight that sometimes it can be options activity that causes a stock to move. In this instance a trader bought 2500 fifty delta options, meaning that a market maker who sold them would likely have to buy 125,000 shares to hedge the position, this activity in a thin trading name like SNDK that has been beaten up of late could easily cause a short squeeze.  The company is speaking Tuesday at 11am at Morgan Stanley’s Tech Conference, which traders may be positioning in front of.