Technology SPDR (XLK) - Enormous 1 Sided June Option Action

Discussion in 'Options' started by livevol_ophir, May 17, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    XLK (Technology Select SPDR) is trading 22.28 with IV30&#8482 up 6.8%.

    <img src="">

    The company has traded nearly 87,000 options on total daily average option volume of just 13,995. All but 2,611 contracts have been calls for a 33:1 call : put ratio. The largest trades are Jun 24 call purchases 85,000 times (not a typo). The Stats Tab and Day's biggest trades snapshots are included (<a href="">in the article</a>).

    The Options Tab (<a href="">in the article</a>) illustrates that at least a good portion of the calls are opening (trade volume > OI). You can also see the vol in Jun is up about 1.7 points.

    Clicking on the Level 2 pop-up we can see that the substantial portion of the OI was opened on Friday (<a href="">in the article</a>).

    Looking at the Time & Sales Tab for those calls on that day (<a href="">in the article</a>) and filtering for trades >= 1000 lot, you can see that they were substantially purchases.

    Note some of the "red" colored trades are on locked markets so trading on the bid doesn't mean anything.

    The Skew Tab snap (<a href="">in the article</a>) finishes out the trade - we can see the 24 strike vol relative to the other lines (and months).

    All three of the back months (Jun, Sep, Dec) converge vols on that line. The Skew is downward sloping (smirk) - which is a normal shaped skew. To read why skew exists and what "normal" skew is you can <a href="">click here</a>.

    Even though the size has been huge - looking at possibly over 100,000 open interest (long) or the right to purchase 10 million shares, the price is pretty low (these are ~$0.15 options). It's a big bet in terms of contract size; total cost of 100,000 options is: 100 x 100,000 x $0.15 = $1,500,000.

    The stock volume stats (<a href="">in the article</a>) demonstrate that the underlying has been more active than average.

    It's possible these calls are trading with stock (buy call + sell stock = buy put) but, it's almost certainly not 1:1 as stock volume isn't that high relative to average. The 52 wk. high in this SPDR is 24.16 so if this is a pure long bet - it's looking for XLK to break it's year high within the next month.

    If the calls are turned into puts, they are 82 delta (deeps). My best guess is that these are long bets and the extra stock volume is market makers covering some deltas. Keep in mind, these are $0.15 calls...

    If unhedged, this bet makes $10,000,000 for every dollar above $24.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews here:
  2. livevol_ophir

    livevol_ophir ET Sponsor

    Another 37,000 Jun 24 calls purchased this morning (May 19th).
  3. are any of them yours? seriously...
  4. livevol_ophir

    livevol_ophir ET Sponsor

    No. I wouldn't do that... I actually don't really understand the trade that well. I guess hoping for a market rebound and maybe a dump @ 0.50 (ish).
  5. ?....Could somebody be trading "it" against the other large-cap tech stocks somehow?......vol arbitrage against higher vol stocks or indices?......Is "unusual" volume showing up elsewhere?.....Are your pals Gates, Dell, Jobs or Ellison doing something? :confused: :eek: :cool:
  6. livevol_ophir

    livevol_ophir ET Sponsor

    I asked Bill and Larry, nothing is up. Michael doesn't answer the phone anymore ever since I built my own comp...

    I don't think this is a vol play because it's so far OTM. I mean these are $0.15 options after all. I suppose it could be a delta hedge on a short market position, but sill sorta weird.

    I hate to say this, but it could also be a prop trader blowing out. Maybe last ditch effort is buy 20,000,000 deltas if technology rips... :confused:
  7. 1) What about Steve? :confused:
    2) Have you ever "hand flashed" an 87,000-lot into a pit? :eek: :(
  8. livevol_ophir

    livevol_ophir ET Sponsor

    Steve is too big time for me now... iPad and such...

    And we don't use hand signals anymore - now it's all prim and proper. We're not even allowed to swear... that often...
  9. thanks for letting me know. I already have seen several bloggers pointing out bullish signals, and that we go to dow 12k this summer. This bet confirms that, but since this is based on technology I guess the better thinks technology will outperform.
  10. livevol_ophir

    livevol_ophir ET Sponsor

    No problem, but just to be clear. I'm not saying I'm bullish - I'm just pointing out a trade (granted a large one).
    #10     May 19, 2010