1.1 C
New York
Monday, February 26, 2024

Retail investors paint mixed picture through options

Today’s tickers: XRT, EXPD, RIMM, EWJ, GM, STP, MU, WFC, XLF, JPM & ASH

XRT Retail ETF SPDR – Shares of the retail ETF were on the rise today, gaining more than 3.5% to arrive at $23.58. Some traders established bearish bets using options, while one bullish trade stood out like a sore thumb in the June contract. At the June 22 strike price one investor purchased 17,200 in-the-money calls for a sizeable premium of 3.12 apiece. The rest of the notable trades were decidedly looking for downside movement in shares. At the near-term April contract a credit spread was initiated by purchasing 3,000 calls at the 24 strike price for 85 cents and selling 3,000 calls at the 22 strike for 2.00 apiece. The net credit enjoyed on the trade amounts to 1.15 and will be retained in full if shares fall below $22.00 by expiration. Another pessimistic investor crafted a put spread in the June contract by purchasing 5,000 puts at the 24 strike price for 2.40 each and selling 5,000 puts at the 20 strike for 90 cents. The net cost of the trade amounts to 1.50 and yields a maximum potential profit of 2.50 if shares can fall to $20.00 by expiration. Profits will begin to amass on the downside if shares fall below the breakeven on the trade at $22.50. Finally, some 5,000 puts were traded at the May 22 strike where there had previously been no open interest. The bulk of the smoke-signals from traders today suggest that the rally XRT experienced today will be short-lived.

EXPD Expeditors International of Washington, Inc. – The global logistics services company has experienced a share price rally of 6% to $29.64. EXPD appeared on our ‘high option volume put/call ratio’ market scanner with a put-to-call ratio of 190. One investor looks to be taking profit today from the short sale of 20,000 puts at the May 20 strike price, which may have originally been sold for a premium of between 0.88 cents and 1.18 per contract. The purchase of those 20,000 puts for 30 cents closes out the short position and leaves the investor with a profit of between 0.58 cents and 0.88 cents. Further along in the August contract it looks like this same investor is reestablishing a short put position. With no existing open interest at the May 22.5 strike price, 15,000 puts were likely sold short at a premium of 1.50 apiece. The investor will again look for time value and/or intrinsic value to decay the put premium at which point he will neutralize the position by repurchasing the puts for less than 1.50. Repeating the strategy at a higher strike price in the August contract indicates that this trader is more confident that shares will remain higher than the 52-week low on the stock of $23.86. This is suggested because of the risk of losses one would incur by being short puts during a share price decline through the strike price.

RIMM Research In Motion Limited – Currently at $45.40, the maker of BlackBerry devices has experienced a 5% increase in share price, helping to lead the tech sector upwards. News of an investment bank upgrade boosted sentiment surrounding the stock. Option investors made notable bullish trades in the April contract by trading call options throughout the day. Looking for further upside gains, traders picked up 5,600 calls for 1.55 apiece at the April 50 strike price. Even more bullish were call purchases in the amount of 2,900 at the April 55 strike for 63 cents each, and 1,400 at the 60 strike for a 26 cent premium per contract. Call premiums are on the rise, once again rewarding those traders who were first out of the gate. Out of those reported, the April 50 strike price is the closest to being in-the-money, but getting there by expiration would require a 10% share price rally from the current price.

EWJ iShares Japan Index Fund – Shares of the ETF have rallied by more than 1% to $8.38. EWJ appeared on our ‘most active by options volume’ market scanner after one investor established a bought strangle in the June contract. While the lots traded to the middle of the market, we believe that the most likely scenario involves the purchase of 15,000 calls at the June 9.0 strike for 28 cents and the purchase of 15,000 puts at the June 8.0 strike for 44 cents apiece. If this is the case, the trader paid a total of 72 cents for the strategy and is looking for shares to move. Shares would need to surpass either of the breakeven point located at $9.72 on the upside and at $7.28 on the downside in order to garner profits.

GM General Motors Corporation – One pessimistic investor took advantage of today’s 15% share price rally by heading straight for put options in the June contract. Shares are currently at $3.44, but apparently one grizzly-bear felt the need for downside protection going as we head into the summer months. At the June 1.0 strike price 18,600 puts were purchased for a premium of 22 cents apiece, where previously less than 3,000 lots of open interest existed. With a breakeven share price of $0.78 cents it appears that this trader sees shares going all the way – all the way down, that is.

STP Suntech Power Holdings Corp., Ltd. – ADR – The solar energy company’s products provide reliable and environmentally-friendly electric power in numerous markets around the world. Shares have soared upwards at light-speed, gaining approximately 36% to stand at $10.68. Today’s share price is more than twice that of just a few of weeks ago when shares touched down to $5.09, the 52-week low for the company. STP edged onto our ‘hot by options volume’ market scanner along with a number of other green-energy companies. Options investors were keen to get their feet wet this morning and were seen picking up call options. At the April 12.5 strike price, more than 3,400 calls were purchased for an average price of 36 cents each. The volume at the 12.5 strike continues to rise along with the share price and option implied volatility. Volatility had peaked at 120% from yesterday’s 104% reading, but has since come off to stand at 115%. Something is setting this sector on fire today amid a flurry of activity.

MU Micron Technology, Inc. – Shares of the manufacturer and marketer of semiconductor devices have jumped 7.5% to $3.99. Option traders eagerly looked for upside opportunity on the stock by trading calls in the April and May contracts. Indicative of this trend is the call-to-put ratio which is currently at 29 and implies that 29 calls were in action to every single put. At the April 5.0 strike it appears that investors were willing to pay an average of 13 cents for about 4,600 call options that have a 24% chance of landing in-the-money by expiration. Further along, traders looked to the May 4.0 strike where there was almost no existing open interest, and picked up 5,500 calls for a VWAP of 58 cents per contract. These options are nearly at-the-money given today’s share price rally and early-bird investors were able to lock in at around 58 cents while current traders must pay a more expensive premium of about 65 cents.

WFC Wells Fargo & Co. – A large volume trade caught our attention on WFC when the ticker jumped to the top of our ‘most active by options volume’ market scanner. Shares have experienced a decline of more than 2% to $16.03. In the July contract it appears that one investor initiated a ratio put spread, although we note that the parameters of the trade are a bit confusing. If our supposition is correct then this trader sold 60,000 puts at the July 10 strike price for an average premium of 1.50 and purchased 30,000 puts at the July 15 strike price for about 3.50 apiece. These volumes trump open interest at the July strikes and leave this individual with a net cost of 50 cents ([1*3.50] – [2*1.50] = 0.50 cents) for the spread. This strategy suggests that the trader is looking for shares to decline by expiration day in July, and optimally would like the share price to fall to $10.00 where the maximum profit of 4.50 is realized. The selection of the 10 strike price makes sense because in order to lose money on the trade, shares would need to plummet through the 52-week low of $7.80 to $5.50. In order to bank 4.50 by expiration, shares would need to lose over one-third of their value to $10.00. At the more near-term May contract one investor does not see shares falling vociferously and enacted the sale of 11,100 put options at the May 12 strike price for a premium of 1.45. Apparently, this trader is more bullish on the stock and does not feel the need for downside protection through the breakeven point at $10.55.

XLF Financial Select Sector SPDR – Shares are currently off by less than 1% to $9.29 for the financial ETF. One investor was seen looking for upside movement heading in the May contract where he established a bull call spread. Purchasing 10,000 calls at the May 11 strike price for 51 cents apiece and selling 10,000 calls at the May 13 strike for a premium of 16 cents yields a net cost of 35 cents for the strategy. If shares were to rise to $13.00 by expiration this investor would realize a maximum profit of 1.65. More optimists were observed populating the June contract where 10,000 calls appear to have been picked up for 1.05 each at the 10 strike price. Shares would need to rally to $11.05 in order for profits to begin to amass. Unlike the call spread described above, these pure-call buying investors are looking for unlimited upside potential.

JPM JPMorgan Chase – Option implied volatility continues to wane despite a 1.2% dip in shares at JPM. Volatility has come in to 93% from 108% a week ago. Today one notable trade deployed in options land was a 20/25 put spread in the May contract in which an investor bought 5,000 higher strike puts giving rights to sell shares at the price by expiration. Offsetting this purchase was the sale of the same amount of puts at the 20 strike, which reduced the trade cost to 1.36. The 25 strike puts would have set the investor back 2.54 in isolation. The trade will make a maximum of 3.64 should JPM be trading at or below a share price of $20.00 by May.

ASH Ashland, Inc. – The Kentucky-based specialty chemicals company edged onto our ‘hot by options volume’ market scanner as investors showed interest in call options in the near-term April contract. Shares have rallied more than 5% to $9.18. Trumping existing open interest, traders picked up more than 5,000 calls at the April 10 strike price for an average premium of 50 cents each. Buying interest was also observed at the April 12.5 strike price where traders reeled in more than 1,000 calls at about 15 cents apiece. Option implied volatility has jumped from yesterday’s reading at 81% to the current value of 93%.

Notify of
Inline Feedbacks
View all comments

Stay Connected


Latest Articles

Would love your thoughts, please comment.x