Tuesday’s Notable Options Activity: $FXE, $IBB, $NKE, $PEP, $POT, $UUP

by Dan March 11, 2015 7:07 am • Commentary

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

1. FXE – minutes before the close the etf that tracks the Euro saw a massive put spread purchase. When the etf was $105.23 a trader paid $1.96 for 200,000 Jan 102/94 put spreads to open, or about $39 million in premium.  This trade breaks-even at $100.04, with a max gain of $6.04 at $94 or lower which would be nearly $121 million in profits.  I described the trade last night on CNBC’s Fast Money:

2. UUP – the dollar etf saw some decent size put buying in short dated puts earlier this morning when the etf was a 26 a trader paid .07 for 50,000 march 27th 25.50 puts to open.While the contract size was large, the premium of $350,000 was not. In front of next week’s FOMC meeting and after the massive move the dollar as had of late, this is a low premium way to get a lot of leverage to move to the downside. Later in the afternoon when the etf was $26.03 a trader paid .58 for 4,000 of the April 10th weekly 26 straddle (bought the call and the put).  This trade breaks-even at 26.58 on the upside and 25.42 on the downside.
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3. NKE – reports fiscal Q3 results next Thursday. The options market is already pricing about a 4% one day move which is shy of the 4 qtr avg of about 5%. Total options volume ran 2x average, with most of the volume in puts. But the flow might not have been bearish. When the stock was 96.85 a trader sold 14,000 March 95 puts to open at 1.15.  If the stock is above 95 on next Friday’s close then the trader will receive the 1.15, or $1.6 million in premium.  The put sale obligates the trader to buy the stock at 95, but less the 1.15 premium received, so 93.85, down about 3%
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4. IBB – the biotech etf that is dominated by large cap stocks like BIIB, CELG, GILD, REGN and AMGN making up 40% of the weight saw some opening put buying. When the etf was $343 a trader paid $4.50 for 3100 April 320 puts to open. The IBB is massively outperforming the broad market, up 13% on the year vs the S&P500 down about 1%.
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5. PEP – total options volume ran 4x average daily volume with most of the activity in calls.  The most active strike on the day was 28,900 of the April 105 calls, which looked to be closing, possibly an investor closing an overwrite as there is 56,000 open interest in the strike. The two largest block trades on the day was a buy of 11,000 Apr 105 calls for .50 when the stock was $94.94, and 9200 of the same strike for .47 when the stock was 94.71.
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6. POT – the chemical manufacturer is down 12.5% in the last 15 trading days, with most of the damage being done in the last week. When the stock was $33 yesterday a trader paid .47 for 10,000 Jan 23 puts to open, with a break-even at 22.53. That’s down 31%!
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