Monday’s Notable Options Activity: $KO, $OIH, $SPY, $TAP, $VNQ

by Dan March 17, 2015 7:08 am • Commentary

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, a trader paid 1.80 for 20,000 of the OIH (oil service etf) July 30 puts to open, that’s $3.6 million in premium. Since that put purchase the etf is up nearly $1, talk about selling the low:

OIH 1 day chart from Bloomberg
OIH 1 day chart from Bloomberg

2. KO – There were buyers of the April 41 calls, with the largest block a buy of 6800 for .59 when the stock was 40.19,000 traded on the day vs open interest of 7600.  The stock was down almost 9% in a straight line since the earnings gap on Feb 27th, but is trying to stabilize at technical support near $40.  Despite the sharp sell off of late, the stock remains expensive at 20x expected 2015 earnings that are supposed to decline 2% year over year, and earnings and sales growth could remain strained with a continuation of dollar strength as more than 60% of their sales come from outside the U.S:

KO 1yr chart from Bloomberg
KO 1yr chart from Bloomberg

3. JPM – saw what looked like a roll up and out of  a call overwrite, when the stock was $61.68 a trader bought to close 12,000 March 57.50 calls for 4.30 and sold to open 12,000 May 60 calls at 2.82 to open.

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:

TAP 1yr chart from Bloomberg
TAP 1yr chart from Bloomberg