Here is some generally directional, untied options activity that caught my eye during Wednesday’s trading:
1. XLF – the most active single stock or etf option was the June 22 puts, with 84,000 trading on the day, most bought in a block of 65,000 to open for .29 when the etf was 24.31. Total options volume ran more than 4x average daily volume, with puts outnumbering calls almost 3 to 1. The second most active strike on the day was 53,000 of the June 25 calls. When the etf was 24.33, 37,500 were bought for .42, they were marked closing vs 44,000 of open interest. The increased interest could be tied to the first set of results from the Fed’s bank stress tests due out after the close today, but I think it is important to note that Berkshire Hathaway and Wells Fargo make up nearly 18% of the weight of the etf, so not such pure play on controversial money-center banks like BAC, C & JPM, which make up about 18% of the weight.
2. BABA – the stock saw a massive 6.5% intra-day turnaround after making a new all time low at $80.17, still up nicely from its September IPO price of $68, but down 30% from the all time highs made in November. Total options volume ran almost 3x average daily volume with the most active strikes, 10,000 of the March 80 puts, and 9,000 of the March 90 calls. These two strikes are interesting as there seemed to be closing sellers of the March 80 puts as the stock was near the lows in the morning, and buyers of the 90 calls as the stock was in reversal mode. The main event will be the ipo lock-up expiration of 429 million shares on March 18th which has been a massive overhang on the shares in 2015. I would also mention that the news-flow around the company and certain of its businesses, its deceleration in growth and some issues with regulators certainly hasn’t helped sentiment, but yesterday’s volume reversal in both the stock and options could mark the $80 level as formidable technical support.
Oh and one more point, because the BABA IPO was such a massive deal, the largest IPO on record, and the fact that there were six co-lead underwriters (Credit Suisse, Citi, Deutsche Bank, Goldman, JP Morgan and Morgan Stanley) I suspect these guys go back to the well and pitch the company hard to manage the lock-up shares in the form of a secondary offering, giving the banks another opportunity to book more fees and to help manage the potential volatility the unlocked shares could have on the share price.