Here is some apparently untied directional options activity that caught my eye in today’s trading:
PYPL: Paypal reports Q3 results Thursday after the close. The options market is implying about a 5% one day move, which is rich to their 3.65% average one day move since being split from EBAY in the Summer of 2015. When the stock was $40 shortly after noon it appears that a trader rolled out a bullish bet, selling to close 4,000 Oct 41/43 call spreads at 41 cents and bought to open 4,200 of the Nov 41 calls for 89 cents. These calls break-even at $41.89, up 4.7%, very near the prior closing high:[caption id="attachment_67247" align="aligncenter" width="600"] PYPL since July 2015 from Bloomberg[/caption]
Read our bullish trade write up from May: PYPL – Bill Me Later
TEVA: Teva Pharma has been a trainwreck in 2015, down about 35%, today bouncing off of a two year low. When the stock was $42.31 at 11am, a trader paid $1.60 for 10,000 of the Jan 45 calls to open. These calls break-even at $46.60, up 10% from the trading level. I suspect some biotech investors are starting to think that good quality names like TEVA have been beaten up so badly in the last year, no matter what the outcome in the election next month these stocks will rally. A look at TEVA back to Jan 2014, the stock has massive technical resistance at $50:[caption id="attachment_67253" align="aligncenter" width="600"] From Bloomberg[/caption]
TWX: There appeared to be a bullish roll in Time Warner calls today where a trader closed out of a block of what are now deep in the money calls and using some of the gains to roll up. When the stock was $79.60 in the afternoon, a trader sold to close 7,500 Jan 72.50 calls at $8.13 ($6.1 million in premium) and bought to open 15,000 Jan 82.50 calls for $2.04 ($3.06 million in premium). TWX has a fairly constructive year to date chart, trading between $75 and $80 for the last few months.[caption id="attachment_67254" align="aligncenter" width="600"] TWX ytd from Bloomberg[/caption]
The next identifiable catalyst for TWX will be their Q3 results on Nov 2nd. The options market is pricing in about a 5% move in either direction between now and Nov 4th close, which seems hefty, but the stock on average has moved above 4% following the last 4 quarterly reports, which is above their 10 year average one day post earnings move of 2.65%.
Read our take on TWX following NFLX’s results last night: Time Warner (TWX) – For the Watch