Here are some apparently directional options trades that caught our attention in today’s trading:
GLD: the shiny metal has sat out the explosion in metal and mining stocks over the last month or so, with the etf that tracks gold down nearly 11% since the U.S. election, down 15% from the 52 week highs in early July, and now approaching technical support at $110:
One trader appeared to be positioning for a sharp move higher by March expiration (or possibly a hedge). When the etf was trading $111.34, 25,000 of the March 125 calls were bought to open for 70 cents (or $1.75 million in premium). These calls break-even at $125.70, up 13% from the trading level.
EWZ: In late October the etf that tracks the MSCI Brzail 25/50 Index was up 120% from their January lows, but hit the skids since the election results, down about 18%. From a technical level, the stock’s Nov 9th gap was below the uptrend that had been in place since Jan, and is quickly approaching the July breakout level near $30 that might serve as near term support:
When the stock was $31.63 it appeared that a trader rolled down and out some calls, selling to close 36,000 Jan 35 calls at 47 cents and bought to open 36,000 June 33 calls for $2.56. These roll traded delta neutral (23^, or 230,000 per 10,000 contracts), meaning the trader bought calls and sold shares against it, which I suspect does not change what likely is a directional bet as this might have been done to secure better pricing on the options portion and the initiator will leg out of the stock.
IWM: The Russell 2000, the small cap index had been the big winner since the election as the promise of a pro-business stance would have its most immediate effect on smaller domestically focused US businesses. At one point, the IWM, the etf that tracks the Russell was up 14% from Nov 8th but has been down every day this week since Friday’s 52 week highs. At least one trader is positioning for a pullback towards the Nov 11th breakout level near $127.
When the etf was $131.38 a trader bought the Dec 9th weekly 131 / 126.50 1×2 put spread 15,000 by 30,000 for 71 cents. This trade breaks-even at $130.29, has max profits of up to $3.79 down to 126.50. The profit trails off between $126.50 and $122.71 with losses below.
Its also worth noting that $129.50 could be a significant physiological level as it was the breakout level to new all time highs: