Options Flow Summary: General Sentiment & Starbucks Corp (SBUX)
General Sentiment
The markets are lower by close to 1% in relatively light trading for an expiration week. The volume at mid-afternoon is just over 10 million contracts with nearly equal numbers of puts and calls on the tape. Sentiment is slightly bearish and much of the focus is on out-of-the money calls.
We are seeing traders bargain hunt and capitalize by selling into implied volatility levels that remain elevated but several points off the highs reached Monday. Seeing the sharp drop in the CBOE VIX on Tuesday's 3% rally may be leading some traders to position for similar behavior with a short-call position.
This position may lose from market direction but gain from a general volatility crush that stable markets over the upcoming holidays might bring.
Starbucks Corp (SBUX)
Earnings will be posted at close today. The volume has been strong all week with a particular focus on the November 25 calls. The stock is currently down about 2% to $23.70.
Total call and put open interest at November 25 strike is 50,000 contracts with the Nov 25 calls still trading actively. More than 10,000 of these have traded today, most for prices near $.30. The general flow in these calls appears to be seller initiated.
A number of multi-market sweep orders have been used to position for downside reaction to earnings. This includes a buyer of 2,500 of the November 22.5 puts for $.30, and a seller of 2,000 Nov 25 calls for $.30 and $.35. This suggests the stock may be in for an interesting move in just a few hours.
Posted By: Trade Alert
"
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.
View Henry Schwartz's post archive >
