Tuesday’s Notable Options Activity: $BABA, $FB, $TWTR, $XLY

by Dan May 6, 2015 8:59 am • Commentary

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

1. XLY – saw a large bearish roll. When the consumer discretionary etf was a 76.16, a trader sold to close 35,000 May 75 puts at .35 and bought to open 35,000 June 75 puts for 1.26 to open. This is the put strike we are long and we will also be looking to roll or close soon as time is not on our side: http://www.riskreversal.com/2015/04/20/new-trade-xly-at-your-discretion/

2. TWTR – since last Tuesday, shares of TWTR have seen one day where the stock has closed up (Thursday) and even then fractionally.  The stock is clearly trying to find a bottom at current levels, down 26% in the last week:

TWTR 1 week chart from Bloomberg
TWTR 1 week chart from Bloomberg

Yesterday, shortly after noon when the stock was $38, there was a buyer of the Jan2017 60 calls, paying $3.05 for 5,000.  Before you TWTR bulls get all geeked up, these look like they were bought to close vs 12,800 of open interest, possibly a long holder closing an overwrite.

3. FB – call volume ran 3x that of puts, a bit above the average over the last month, with the top 10 most active contracts all calls.  The most active were 11,000 of each of the following strikes: June 90 calls, Oct 95 calls and June 80 calls.  This call activity came on a day when FB touched its 200 day moving average for the first time since July 2013, and closed just above:

FB 2yr chart from Bloomberg
FB 2yr chart from Bloomberg

In the near term, a test an hold of the important momentum indicator, would likely mean a re-test of the low $80s, but a failure here, following a 5% decline since earnings would likely result in a re-test of the Dec lows near $70 in the coming weeks (possibly days).

4. BABA – options volume exploded yesterday, more than 2x average daily volume, on a day that saw the stock make a new all time low, breaking important near term support at $80 and closing below:

BABA since Sept IPO from Bloomberg
BABA since Sept IPO from Bloomberg

BABA reports their Q1 results tomorrow before the open, and the options market is implying about a 7% event move vs. the average move of 6.5% in the two quarters since going public in September.  The largest trade of the day yesterday was a roll in puts, where a trader sold to close 9,000 May 8th weekly 80 puts at 3.50, and bought to open 9,000 June 77.50 puts for 3.40, likely rolling protection.