Monday’s Notable Options Activity: $BAC, $QCOM, $QQQ, $XLE

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

1. QQQ – on a day that saw the Nasdaq Composite close above 5000 for the first time since March 2000, it was sort of fitting to see large bullish roll in the etf of the Nasdaq 100 etf (QQQ). When the etf was $109 a trader sold to close 10,000 March 107 calls at 2.54 and bought 25,000 May 113 calls for .89 to open. What’s interesting about this trade is that the trader is collecting $2.54 million for the closing sale, and using $2.3 million of the proceeds to roll the bullish view out 3 months, with a break-even up 4.5% and gaining greater leverage with the increased contract size.

Taking a look at the 16 year chart there is little resistance overheard to the previous highs at $120.

QQQ 15 year chart from Bloomberg — QQQ 16year chart from Bloomberg

With options prices for the QQQ nearing 52 week lows, those looking to remain exposed to further gains but who worry about the heavy concentration among the top 10 holdings can look to define their risk with calls or call spreads:

QQQ 1yr chart of 30 day at the money IV from Bloomberg

I have a different view on the rally in tech shares, from Friday: New Trade – $QQQ The Curtains

2. XLE – On a day that saw a Brent Crude down 4%, there was a very large bearish roll in XLE. When the Energy Select etf was $78.27 a trader sold to close 50,000 March 75 puts at .70 and bought 40,000 April 75 puts for 1.47 to open. That is closing on $3.5 million in premium, and opening on $5.88 million. This trade breaks-even at $73.53, down about 6%. The intra-day 52 week low in the XLE is $71.70 from last month. What is apparent from a quick look at the three year chart below is that the etf is still in a downtrend and the next real level of support is down 10% just above $70.

3. BAC – call volume ran hot at 4x average daily volume, half of which came on one trade. When the stock was $15.98 a trader sold to close 75,000 March 13th weekly expiration 17 calls at .05 to close and bought 50,000 March 13th weekly expiration 16.50 calls to open for 15 cents. The Fed’s stress test results are due in two parts on March 5th and 11th.

4. QCOM – despite the stock’s 16% rally off of last month’s lows, it is still down on the year and well below the 52 week highs of $81.97 made in July. One trader is taking a shot in the dark. When the stock was $72.18 a buyer paid .13 for 24,000 April 80 calls to open. April expiration will not catch the company’s fiscal Q2 earnings scheduled for April 22nd, with the only scheduled event the company’s annual stockholders meeting on March 9th. Last year, on March 4th, the company announced a 20% increase to their quarterly dividend, and an additional $5 billion to their existing share buyback program.