Atop the SP-500’s unusual option volume on Tuesday, internet retail giant Amazon (AMZN) held the No. 1 spot. Compared to the outfit’s 50SMA of 22,000 contracts, the session brought in shopping and some likely dropping of calls and puts totaling nearly 169,000. Calls outpaced puts by about a 1.5-to-1.0 margin and the March Weeklys responsible for roughly 45% of the overall volume with open interest statistics easily topped in its very active surrounding money 200, 205, 210 and 215 calls and puts.
News catalysts for Amazon’s heavy option activity were largely absent Tuesday. But a technical price squeeze in shares through 200SMA resistance which then reversed into a volatile bearish shooting star candlestick, albeit with gains of about 1.25% above the key long-term moving average; can be appreciated as being largely responsible for the fast money trader’s spirited March Weeklys Madness.
In the No. 2 spot, bulls, bears and hedge hogs were unsurprisingly busy in Apple (AAPL). With shares up another 1.25% to fresh all-time-highs on more headlines and color commentary than we dare count, traders pushed its daily option total towards 815,000 and similar to Amazon, saw run-of-the-mill favor of about 1.5-to-1.0 directed at its calls.
Most active by what we like to refer to as “crowd proxy” i.e. spying on the end of day totals, the March Weeklys 610 and 615 calls traded in similar sizing of about 42,000 and 47,000. That sets up, hypothetically speaking, an opening and well-traded vertical spread which closed in-the-money by about 4.50 points versus a closing price of $2.90.
Figure 1: Walgreen’s (WAG) IV Chart
Rounding out the top three, Walgreen’s (WAG) saw more than three times its daily contract average on volume of 60,500 in very evenly-matched trading of its calls and puts. In a trifecta of sorts, shares of WAG also finished up about 1.25%, but did so as part of a bearish reversal bar. After gapping open following the company’s earnings release and one highlighted by a modest penny profit beat and matching pre-announced revenues, WAG failed in its breakout attempt above lateral and 200SMA resistance.
With uncertainty surrounding the report’s release effectively removed from the pricing, WAG premiums came under pressure across-the-board and hit their lowest levels since immediately before last summer’s Eurozone-inspired volatility lift in the market. As that action relates to underlying statistical movement, the modest crush of 10% to 25% from the mid to high 20s into the low 20s and towards 20% in the April contract has premiums looking overall fair-to-cheap. Given the overall situation though, our own diagnosis thinks a long calendar looks like a stronger prescription than outright long calls or puts.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
