Big Printin’ 7/7/15: GLW, HD, SUNE

by Dan July 7, 2015 3:56 pm • Commentary

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

1. GLW – earlier in a post I highlighted the short dated put volume in the stock, with total options volume more than 6x average daily:

Put volume was more than 10x average daily volume and predominately in short dated options. The 5 most active strikes today are in July 10th weeklies, Aug and Sept near the money puts.

The largest trade of the day was a bearish roll in July 10th weekly puts. When the stock was $19.23 a little less than an hour after the open, a trader sold to close 5,000 July 10th 20 puts at 77 cents and bought to open 7500 July 10th weekly 19 puts for 40 cents, prior to this trade there was an opening buyer of 8000 Sept 20 puts for 1.28 to open.

2. HD –  saw an opening buy of a bullish ratio call spread,. When the stock was just 112.13 a trader bought 5,000 of the Aug 7th weekly 112 calls for 2.25 to open and sold to open 10,000 of the Aug 7th 115 calls at .90,. The spread cost .45 and the trade breaks-even at $112.45 with a max gain of $2.55 at $115, profits trail off between $115 and $117.55 with losses above.  This sort of trade structure could be a leverage/ yield overlay of 500,000 shares,. If this was the case and the stock was below $112 then the trader would lose the .45 or $225,000 but could add up to $1.275,000 in added gains on the upside. The stock would be called away at $115, but the trader would have effectively sold the shares at $117.55.  What’s interesting about the choice of the weekly options is that it does not catch the company’s Q2 earnings already confirmed for August 18th.

3. SUNE – despite the perceived sensitivity of solar stocks to the price of oil, Sun Edison (SUNE) has been able to hold on to year to date gains of more than 50%, showing amazing relative strength to many in the space.  Since making new 52 week highs last month, SUNE has sold off about 8% and today it appeared that one trader is playing for a bounce in the stock over the next week and a half. When the stock was $29.61 there was a buyer of 10,000 of the July 20/32 call spreads paying 50 cents, with another 10,000 trading shortly later for the same price.  If opening the trade breaks-even at 30.50 with max profit of 1.50 if the stock is 32 or above on next Friday’s close. So risking $1 million in premium to possibly make up to $3 million if the stock is between $30.50 and $32, with max gain of $3 million if the stock is above $32.  The 52 week high is $32.66 made on June 24th.  The company is expected to report Q2 results in early August.