Here is some generally directional, untied options activity that caught my eye during Monday’s trading:
1. OIH – A little less than an hour after the open,
2. KO – There were buyers of the April 41 calls,
3. JPM – saw what looked like a roll up and out of a call overwrite, when the stock was $
4. VNQ – not a name we see a lot of options flow in, the Vanguard REIT etf. In fact today’s options volume nearly doubled that of the existing open interest in the stock coming into the day.
When the etf was $83.42 a trader paid 25 cents for the April 80/77/74 put butterfly 30,000 by 60,000 by 30,000. Let me break this down for the butterfly newbies:
-bought 30,000 April 80 puts for .70
-sold 60,000 April 77 puts at .35 each or .70 total
-bought 30,000 April 74 puts for .25
So how does the trade make and lose you make ask?
Losses: if the stock is between 80 and 79.75 & between 74 and 74.25 the trader can lose up to .25 with a max loss of .25 (or $750,000) above 80 or below 74
Profits: if the stock is between 79.75 and 74.25 the trader can make up to 2.75, with a max gain of 2.75 if the stock is at 77, that is $8.25 million
5. SPY – when the S&P 500 etf was 208.48 a trader rolled up a bullish bet, selling to close 77,000 March 212 calls at 17 cents and buying to open 17,000 April 2nd weekly 211 calls for .95 each. These calls break-even at $211.95 up only 1.7%.
6. TAP – when the stock was 75.29 it was reported that 15,000 of the April 77.50 calls were bought to open for 1.85. But looking at the tape these calls appear to be sold on the bid and and implied volatility was down a little more than 2 points, again suggesting they were sold. Either way the size of the trade stands out as it was more than 10% of the existing options open interest coming into the day, and a look at the chart would suggest that if they were sold a long holder might be overwriting their position playing for further consolidation. Or, if they were in fact bought to open that investor is speculating on a breakout of the very long base that stock has been in since last summer, with the stock spending most of its time oscillating between the low and high $70s: