Here is some generally directional, untied options activity that caught my eye during Thursday’s trading:
1. XLV – biotech and pharma stocks closed near the lows of the yesterday, with the XLV closing down 1.4%, marking a nearly 3.5% decline on the week, while biotech stocks faired much worse, with the IBB down 3.2%, down 8% on the week. The XLV saw a large bearish roll when the Healthcare Select etf was $71.67, a trader sold 38,000 June 72 puts at 2.02 to close and buys 38,000 June 70 puts for 1.28 to open.
2. ADBE – yesterday saw a sizable bullish risk reversal, possibly a result of the M&A chatter related to CRM. When the stock was just $75.70, a trader sold to open 14,000 July 70 puts at 1.13 and bought to open 14,000 July 82.50 calls for 1.34. This trade breaks-even on the upside on July expiration at $82.71, up about 9% above the recent all time highs at about $80. On the downside, the trader is put the stock at 70, down about 7.5% and suffer losses below. Between $70 and $82.50 the trader losses the 21 cents in premium, or about $295,0000. On a mark to market basis the structure will suffer losses as the stock moves closer to the short put strike and gains as it moves closer to the long call strike prior to expiration. The one year chart below shows the $70 level as important support, and $80 the breakout level, probably helping in the choice of strikes:
ADBE 1yr chart from Bloomberg
Oh and the recent spike in short dated options prices lends itself to attempting to finance the purchase of options if looking to make a directional play on the stock:
ADBE 1yr chart of 30 day at the money implied vol from Bloomberg
3. CRM – despite ORCL management making statements to the effect that they are not likley the rumored suitor of Salesforce.com, CRM continued to see bullish flow. Shortly after noon the stock saw bullish call activity when the stock was $71.85, a trader paid 2.70 for 2500 June 72.50/80 call spreads to open. Options volume ran 4x avg daily volume, with call volume 3.5x that of puts.
