Here was some apparently untied directional options activity that caught my eye in today’s trading:
MET: Shares of the life insurer saw a sharp intra-day reversal after initial opening down at a one month low following Q3 earnings released this am. Shortly before noon, with the stock near the highs of the day at $47.93 it appears a trader rolled out a bullish bet, selling to close 10,000 Jan 52.50 calls at 49 cents (or collecting $980,000 in premium) and buying to open 10,000 March 52.50 calls for 99 cents (or paying $990,000 in premium). The 52.50 strike is an interesting choice as it is also the 62 week high made last November, while this morning it is worth noting the stock stopped on a dime at its 50 day moving average and support going back to Jan at $45:
GLD: the etf that tracks gold saw heavy call volume, nearly 3x average daily, and 5x that of puts. Not all of the activity looked to be risk on sort of trading as the largest trade of the day looked to be a closing seller of 19,000 of the March 130/140 call spreads shortly after the open at $1.62 when the etf was $123.67. There appeared to be a roll down in Dec calls when the etf was $124.18, with a trader selling to close 11,000 Dec 135 calls at 23 cents and buying to open 11,000 Dec 128 calls for $1.61. Whats kind of surprising as it relates to Gold, it is only up about 3% in the last 1o days, a period in which Spot VIX has risen 70%!
VIX – As we’ve mentioned several times in the past few days, the VIX is spiking in a way that’s not reflective of the actual down move in the broader market. What that means is people are hedging against an election surprise by buying protection in lieu of selling stocks. This is reflected in a the put/call ratio which has spiked to levels last seen leading up to Brexit. From all indications this may continue into the election as the VIX is up by 15% today while the SPX is only down 0.4%. The VIX itself sees the inverse of put/call ratio than that of the SPX as people looking for disaster protection reach for upside calls. It also shows a big spike in total volume over that past few days:
I just love the chart of the VIX overlaid with the SPX over the last 1o years. Guys will twist and turn it, changing time span, add some trend lines etc to fit their prevailing market view. What I see are vol spikes that have generally been associated with central bank activity (or in the case of 2010/11, periods of inactivity) but an equity volatility regime as a whole that has been massively suppressed by easy monetary policy. Over a near 7 year period here in the U.S. that’s resulted in a market that’s been very stable.
And of course, stocks have been lower left to the upper right! So we get why Vol is spiking and equities have yet to be crushed. Election uncertainty and uncertain monetary policy. If HRC is elected Tuesday, and it’s a clean kill, then the lower we go into it, the sharper we bounce after because we’re likely to get more clarity from the Fed after.