Friday’s Notable Options Activity: $DIS, $GOOG, $JD & $TWTR

by Dan April 27, 2015 7:06 am • Commentary

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

1. DIS – with the stock less than 1% from its all time highs at $109.58, a trader paid up to 1.70 for 10,000 of the May 111 calls to open. This trade is worth close to $1.7 million in premium and breaks-even on the upside at $112.70, up 2.75% on May expiration. DIS reports earnings on May 5th days after the highly anticipated Avengers sequel opens.  The options market is implying about a 3% one day move which is rich to the 4 qtr avg of about 2.75%, but that includes last quarter’s 7.6% one day rally.

2. JD – last Tuesday we highlighted the unusually strong price action in the Chinese eComerce company, while also noting the buildup in call open interest over the last couple months (MorningWord 4/21/15: Bull in a China Shop $JD).  On Friday the stock closed at a new all time high, and call volume ran 5x that of puts, with the largest block of the day an opening buy of 5,000 of the May 35.50 calls for 1.40 when the stock was $34.81. The company is scheduled to report Q1 results May 8th prior to the open.

3. TWTR – to be fair there has not been a ton of interesting options volume in the stock of late. Over the last month call volume has been running about 2x that of puts, which is almost inline with total open interest of 596,000 calls to 415,000 puts.  On Friday there was an interesting trade that caught my eye in front of Tuesday’s hotly anticipated Q1 results.  A trader bought 12,000 of the May 1st expiration 51.50 calls for $2.65 and sold 600,000 shares at $51.  This could possibly be a stock replacement trade into the potentially volatile earnings event Tuesday night (the implied one day move is about 11%, the 5 qtr avg is about 16%), or possibly a trader looking for higher than expected movement this week following the results.

On Friday’s Options Action on CNBC I detailed a trade that I am considering to replace my existing long stock position (read more here):

 4. GOOG – on Wednesday, prior to the company’s Q1 results due Thursday, we highlighted some call buying in May and June:

GOOG call volume in the Class C shares was 3x that of puts. In front of tonight’s earnings there was an opening call buyer in both May and June.  When the stock was trading $538 there was a buyer of out of the money calls in May and June.  A buyer paid 3.70 for 1800 of the May 575 calls to open and paid 5.10 for 1800 of the June 585 call

With the stock up 3% Friday after better than expected results there was a buyer of 1,000 of the July 600 calls for $10 to open.  The buyer of these calls sold 30,000 shares at $566,50.  This trader could have been rolling out a bullish view, now defining their risk, and replacing their stock with calls, with a break-even at $610 on July expiration, up 8% which would above the 52 week high, a level that served as a double top in July and Sept:

GOOG 1yr chart from Bloomberg
GOOG 1yr chart from Bloomberg