Tuesday’s Notable Options Activity: $AMAT, $LL, $PFE, $SWFT, $TAP

by Dan April 1, 2015 7:05 am • Commentary

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

1. LL – rallied sharply mid-day Monday on what smelled like BS rumors that Carl Icahn was looking at the company. By the end of trading on Monday, the stock gave back most of the gains as rumors were refuted. On Tuesday the stock was up 5% today, before closing up a little less than 2%.  While total options volume ran only one third of the average daily volume, there was one trade that stuck out to me shortly after the open when stock was $30.64, a trader paid 1.95 for 3,000 of the April 31/36 call spreads to open.  Break-even is at $31.95, max gain of $4.05 if stock is $36 or higher on April expiration.

2. PFE – not a stock we right about often, and certainly not a stock we see options traders position frequently for short term movement.  When the stock was $35 a trader paid 98 cents for 8100 of the April 35 straddle.  There do not appear to be any scheduled events, between now and April expiration as Q2 earnings are confirmed for April 28th.  This trade breaks-even up at $35.98 and down at $34.02 or about 2.8% in either direction.  For the better part of the last six weeks the stock has been trading in a fairly tight range between $34 and $35, so to own the at the money straddle for the next couple weeks you would be playing for a breakout to new highs, or a break-down below the recent range:

PFE ytd chart from Bloomberg
PFE ytd chart from Bloomberg

3. AMAT – it appears that traders continue to position for the long awaited closing of the proposed merger with Tokyo Electron.  When the stock was $22.70 a trader sold 10,000 October 18 puts at .70 and bought 10,000 of the October 25/32 call spreads for 1.21.  This package cost 51 cents, and ended up trading 17,500x on the day.  This trade breaks-even at $25.51 on the upside, with gains of up to $6.49 between $25.51 and $32, with max gain of $6.49 above $32.  Between $25 and $18 the trader loses the 51 cents premium paid, and losses one for one below $18, down about 20%.

4. TAP – the beer company saw a bullish roll when the stock was $73.85, a trader sold to close 14,000 April 77.50 calls at .85 and bought to open 11,000 May 77.50 calls for 2.45 to open. Total options volume ran 10x average daily, with calls making up most of the flow.  Q1 earnings are confirmed for May 7th.

5. SWFT – minutes before the close 15,000 of the November 23 puts were bought to open for 1.70 when the stock was $26.05.  Today’s volume was more than the existing open interest in the stock coming into the day.