Options Flow Summary: General Sentiment, EP & AAPL
General Sentiment
The broad averages are higher by more than 1% in mid-afternoon as many traders return from summer holidays. The volume is ahead of last week, with more than 11 million contracts traded. Also, calls outnumber puts by a small margin. The CBOE VIX is lower by 1.13 to 22.25, as traders adjust their perceived urgency of the credit crisis.
El Paso (EP)
With oil trading above $75/barrel today, a number of energy stocks are up well over 3% and trading with strong options volume. El Paso leads the sector with 177,000 contracts traded so far and a very large package trading on the PHLX this afternoon.
In this trade, a large institutional client sold 18,625 September 16 puts and 12,500 Jan 17.5 calls against a purchase of 20,000 Jan 16 puts, 17,500 January 20 calls, 6,100 Jan 19 calls, and 5,000 Oct 17 calls for an overall net debit. With the stock currently at $16.45, this complex trade appears to involve a roll of long 16 strike puts from September to Jan and a seller of a ëratioí out-of-the-money call spread, similar to the downside protection offered by a collar trade.
The broad averages are higher by more than 1% in mid-afternoon as many traders return from summer holidays. The volume is ahead of last week, with more than 11 million contracts traded. Also, calls outnumber puts by a small margin. The CBOE VIX is lower by 1.13 to 22.25, as traders adjust their perceived urgency of the credit crisis.
El Paso (EP)
With oil trading above $75/barrel today, a number of energy stocks are up well over 3% and trading with strong options volume. El Paso leads the sector with 177,000 contracts traded so far and a very large package trading on the PHLX this afternoon.
In this trade, a large institutional client sold 18,625 September 16 puts and 12,500 Jan 17.5 calls against a purchase of 20,000 Jan 16 puts, 17,500 January 20 calls, 6,100 Jan 19 calls, and 5,000 Oct 17 calls for an overall net debit. With the stock currently at $16.45, this complex trade appears to involve a roll of long 16 strike puts from September to Jan and a seller of a ëratioí out-of-the-money call spread, similar to the downside protection offered by a collar trade.
Apple Inc (AAPL)
The stock is trading up 4% to $144 today in anticipation of a media event and possible product announcement scheduled for tomorrow. Nearly 400,000 contracts traded today, with calls outnumbering puts 2:1. Remarkably, all of this volume was executed without a single trade exceeding 2600 contracts, showing a substantial ëretailí involvement in the name.
The majority of todayís volume involved option buying, particularly September 145 and 150 calls. While the stock has had a very solid run from lows near $112 in mid August to current levels, contrarians might view this biased ëretailí as a sign of a short-term top.
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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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