Mid-Day Flow Summary: QCOM, QQQQ & CA
It's a relatively slow pre-holiday Friday morning. The broad indexes are up slightly and mixed options flow in a number of single-stock issues and general premium sellers in QQQQ.
Qualcomm Inc. (QCOM)
At mid-day, QCOM options are the most active of the single stocks, with 106,000 contracts trading, including a large straddle sale on the AMEX. Tied to a hedge trade of 105,000 shares at $43.05, 5,000 October 42.5 straddles were sold near 11 am for a credit of $7.40. This sale reflects a view that the current levels of implied volatility in the longer dated options prices may be overdone.
Notably, front end options continue to trade at high levels of implied volatility, with aggressive opening buyers yesterday in the June and July at-the-money puts.
ADVERTISEMENT Qualcomm Inc. (QCOM)
At mid-day, QCOM options are the most active of the single stocks, with 106,000 contracts trading, including a large straddle sale on the AMEX. Tied to a hedge trade of 105,000 shares at $43.05, 5,000 October 42.5 straddles were sold near 11 am for a credit of $7.40. This sale reflects a view that the current levels of implied volatility in the longer dated options prices may be overdone.
Notably, front end options continue to trade at high levels of implied volatility, with aggressive opening buyers yesterday in the June and July at-the-money puts.
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QQQQ
There is consistent selling in Q options today- with a significantly large bias of puts to calls. Over 200,000 Q puts have traded today, versus 67,000 calls, for a put/call ration of over 3. The typical put/call for QQQQ options is a ratio of 2 (2 puts for each call). The current spot level for QQQQ is 46.41, and most of todayís activity involves a spread where a customer bought 25,000 July 45 puts and sold 17,000 December 44 puts in a delta-neutral trade that would payoff best in a near-term downside event.
CA Inc (CA)
A massive trade took place in CA (formerly Computer Associates) options on the PHLX today, as a seller sold 30,000 each of the July and August 25 puts as part of a put ëstupid.í The trade was tied to stock in order to avoid an immediate delta-hedge event. However, the size of the trade (17x the average daily option volume level) makes a very strong statement that the recent spike in implied vols coincident with the $3 earnings sell-off yesterday does not indicate long-term problems for the stock.
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There is consistent selling in Q options today- with a significantly large bias of puts to calls. Over 200,000 Q puts have traded today, versus 67,000 calls, for a put/call ration of over 3. The typical put/call for QQQQ options is a ratio of 2 (2 puts for each call). The current spot level for QQQQ is 46.41, and most of todayís activity involves a spread where a customer bought 25,000 July 45 puts and sold 17,000 December 44 puts in a delta-neutral trade that would payoff best in a near-term downside event.
CA Inc (CA)
A massive trade took place in CA (formerly Computer Associates) options on the PHLX today, as a seller sold 30,000 each of the July and August 25 puts as part of a put ëstupid.í The trade was tied to stock in order to avoid an immediate delta-hedge event. However, the size of the trade (17x the average daily option volume level) makes a very strong statement that the recent spike in implied vols coincident with the $3 earnings sell-off yesterday does not indicate long-term problems for the stock.
About Henry Schwartz
Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.
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