Big Printin’ – AAPL, XLE, VIX – An Apple A Day

by Dan September 15, 2016 3:16 pm • Big Printin'

Here is some (apparently) directional options activity that caught my eye in today’s trading:

Apple (AAPL): the stock continues its insane weekly gains, nearing 12% from Monday’s lows, with the stock up 3% at a new 2016 high, placing the stock up 9% on the year.  Options volume exploded with the stock this week, with total volume 2.5x average daily, and calls out numbering puts nearly 2 to 1.  Yesterday, call volume was 2.5x that of puts, with total options volume 4x average daily volume, nearing 2 million contracts.

The largest trade today came at 11am when the stock was trading $115.20, a trader sold to close 10,000 Oct 110 calls at $6.55 ($6.55 million in premium) and bought to open 10,000 Dec 125 calls for $2.01 ($2.01 million in premium).  This roll up and out results in a net credit of $4.54 million (nice trade!) and now breaks-even up at $127.01, up 10% from the trading level.  The 52 week high for the stock came in early November 2015 at $124, with the all time high near $134 in April 2015:

From Bloomberg
From Bloomberg

S&P Energy Select etf (XLE):  There were a couple (apparently) bullish trades in the energy stock etf.  At 11am, when the XLE was trading $68.26 a trader sold to close 15,000 Oct 72 calls at 43 cents and bought to open 10,000 Oct 70 calls for $1.

Also, when the etf was trading $68.54, later in the day, a trader sold to open 8,000 Oct 61 puts at 31 cents and bought to open 8,000 Oct 73.50 calls for 24 cents, resulting in a credit of 7 cents. On Oct expiration this trade does not lose money unless the stock is below 61, down 11%.  The trade has unlimited profit potential above $73.50, up about 7%.

It’s important to note that Exxon (XOM), Chevron (CVX) and Schlumberger (SLB) make up 30% of the weight of the etf.  Prior to the recent decline from the highs in the market in the last week, the XLE was showing very good relative strength. The etf appears to have fairly sound technical support between $64 – $65:

XLE 1yr chart from Bloomberg
XLE 1yr chart from Bloomberg

CBOE S&P Volatility Index (VIX):  Call volume was 4x that of that of puts, with October calls seeing particular interest.  The largest trade of the day was a buy of 75,000 Oct 30 calls for 52 cents, which came shortly after a purchase of 25,000 that were bought for 50 cents.  I mention this call activity on a day where the VIX is down 12%, not because it is easy to draw the conclusion that some traders see a near term explosion in vol, but to highlight the fact that in products like this, without intimate knowledge of the trade it is nearly impossible to glean anything meaningful from the trade. For instance, could this be unwinding a short position where a trader last week sold vol when it was surging, was it part of a ratio or calendar strategy, was it part of a position that was tied to futures?  It’s hard to tell. Headlines like “massive call buying in VIX” can be very misleading unless we know more.

Oh, and I don’t chart the spot VIX for technical clues. That’s a tail wagging the dog.