Big Printin’ – 6/25/15: $ABT, $T, $CBS, $JNPR, $MU, $TAP

by Dan June 25, 2015 4:04 pm • Big Printin'

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

1. MU – in front of today’s fiscal Q3 earnings options volume was more than 2x average daily volume with calls outnumbering puts nearly 2 to 1.  Shortly after the open there was a large three way trade in July that was tied to stock and might have been stock replacement.  Shortly after 10am a trader sold 20,000 July 20 puts at .12 and bought 20,000 of the July 25/27 call spreads for .51 and sold 500,000 shares of stock at $23.92.  If this was an opening trade, its hard to tell as open interest in all of the strikes was enough to cover the trade it is certainly a bit odd, with break-even at $25.39, up about 6%, but capping gains at $1.61 at 27.  The worst case scenario is that the stock is below 20, the short put strike and the trader losses the premium paid for the structure and suffers losses below.

2. T – on Tuesday we highlighted some call buying in August when the stock was a little below $36:

total options volume was more than 3x average daily volume with calls making 75% of the volume. The largest single stock options trade was in T today as the stock was up nearly 3% on two sell side upgrades. When the stock was $35.91 a trader bought to open 42,000 Aug 36 calls for .64, and shortly after bought another 25,000 of the same calls for 70 cents, a total of 88,000 traded on the day.

Well the stock is again seeing call activity today on a day that Bank of America upgraded the stock to a BUY. The stock is made new 10 month highs, and a trader rolled a bullish view. When the stock was $36.35 there was a closing seller of 10,000 expiring tomorrow 36.50 calls and a buy to open of 10,000 July regular 36.50 calls for .32, offering a break-even up at $36.82.

3. JNPR – when the stock was $27, a trader rolled a bullish view, selling to close 22,500 of the July 29 calls at .08 and buying to open 22,500 of the Aug 29 calls for 58 cents to open.  The roll likely occurred to catch Q2 earnings that will not fall in July expiration, as earnings and guidance in Q1 resulted in a 9% one day gap back in late April.  The break-even on these calls at $29.50 is notable as it would make a breakout above the 2014 highs, filling in most of the massive gap lower from 2011:

JNPR 5yr chart from Bloomberg
JNPR 5yr chart from Bloomberg

4. ABT – interesting trade went up in the pharma company before noon. When the stock was $49.76, a trader sold to open 17,500 Aug 52.50 calls at .50 and bought to open 17,500 Aug 45 puts for .32, this trade structure is referred to as a risk reversal and was likely a collar against 1.75 million shares of stock.  If it was in fact to protect long stock, the trade would allow for gains from current levels up to $52.50, and if the stock is there or higher it would be called away. The investor would suffer losses from current levels down to $45, but have protection below.  If the stock is anywhere between 45 and 52.50 the trader would collect the 18 cents in premium, or $315,000.

5. CBS – when the stock was $57.45 there was a buyer of 10,000 of the July 57/54 put spreads, paying .70 to open.  This trade breaks-even at $56.30 on the downside, with profits of up to $2.30 between $56.30 and $54, and max gain of $2.30 at $54 or lower.  The choice of expiration is interesting as CBS has confirmed their Q2 earnings for Aug 5th.

6. TAP – saw a bullish roll. When the stock was 72.13, a trader sold to close 11,500 July 77.50 calls at .40 and bought to open 7500 Aug 75 calls for 2.15. The one year chart (below) looks and feels heavy, with the 50 day moving average (purple below) just crossing below the 200 day (yellow below), which some technicians call the death cross.