Here was some large possibly directional options trades that caught my eye in today’s trading:
GM: Shares of General Motors are having one of their worst days in months, down 4.25% following Q3 results that were frankly not bad with guidance that was at the high-end of their prior guidance. The largest single stock options trade today came in GM, shortly after 1pm where a trader bought 50,000 March 36 calls for 39 cents and sold 750,000 shares at $31.48 (18 delta). Because of the relatively low delta this trade might have been stock replacement where a trader is closing a portion of a long position and replacing with out of the money calls. Or possibly these calls were bought delta neutral with the intent of the trader to secure better pricing from the market maker and intended to cover the stock over time. Yesterday in his space (GM Straddles) we detailed a trade in the options market that appeared to be a yield enhancement trade for an existing shareholder, or where a market paritipant expected GM to remain range-bound.
HAL: shares of Halliburton traded at a new 52 week high last week after reporting results on Oct 18th that were better than expected. The stock is now up 70% from its 52 week lows made in January. Having just being rejected at $50 following the results, one trader today apparently looked to make a bearish bet or add protection for a long. When the stock was $48.40 near 10:30am, a trader bought to open 23,000 Nov 47 puts for 90 cents. $50 is kind of hefty technical resistance:
JNJ: Here is a weird one. Shortly after 1pm when Johnson & Johnson was trading $113.90 it appears a trader sold to open 20,000 Jan 70 puts in two blocks of 10k at .04 and .05 for an average of 4.5 cents. Whats weird about this is that first it’s hard to tell whether they were bought or sold. But you could easily make the argument that whatever the initiator’s intent was that it will end either lighting $90,000 in premium on fire if those options were purchased, or taking a very odd risk to receive $90,000 in premium for selling an option that has about a 15 chance of being in the money on Jan expiration. Just to put $70 in perspective for JNJ, the stock traded as high as $127 this past July, and its Aug 24th, 2015 flash crash low was $82. The stock hasn’t traded $70 since Jan 2013! Regardless of all that options mumbo jumbo, JNJ on a short term basis has had 2 consecutive closes below support at $115:
WMT: Shares of Walmart remain higher on the year by 13%, despite the recent gap lower in the first week of Oct at their annual analyst meeting when they flowered forward guidance. The largest options trade in the name came shortly after the opening when the stock was $69.75 where it appeared a trader rolled down a bullish bet, selling to close 10,000 Nov 75 calls at 12 cents, and bought to open 10,000 Nov 71 calls for 90 cents to open. WMT will report Q3 results on Nov 17th, the day before these calls will expire.
The options market is implying about a 4.3% move between now and Nov 18th expiration. With the stock at $69.50, the Nov 69.50 straddle (the call premium + the put premium) is offered at about $3. If you bought that and thus the implied movement you would need a move above $72.50 or below $66.50 to make money.
WMT is banging up against some near term resistance at $70: