Option Flow Recap Feb 25

Macro / Thematic

XLF - An investor sells 50,000 March 15 puts at a nickel and buys 25,000 June 15 puts at 36 cents. This 1x2 time spread, for a net debit of $0.26, might be rolling out of a hedge from March to a position half the size in June.

GLD - April 138/143 call 1x2 front spread for $.043 debit

Consumer

SLE – An investor sold 62,000 July 18 Calls at $0.49.

PHM – 3500 January 7.5 calls were bought for $1.13. Appears to be a bullish play and a bet that the stock will find a floor, then rally in the months ahead.

F – The June 17 / 20 1x2 calls spread was bought 5,500 by 11,000 times for $0.26.

MED – The April 23 / 26 call spread was bought 1000 times for $1.20. The company is due to release its results early-March.

ARO – 3000 April 25 puts were sold at $1.00

EXPE – 1400 April 20 calls were bought for $1.10.

Energy

HK – An investor sold 37,600 June 19 calls at  $3.71 to close and bought 47,000 June 21 calls for $2.53 to open. It appears to be a rolling up in strikes.

EP – An 1100 contract block of April 18 calls were bought for $1.01 to open.

RRC – Bullish activity today in Range Resources, including, 7200 June 70 calls being bought for $0.45 to open. Over 11k contracts traded in the June 70 strike.  IV was up 2.4%.  1k June/March 52.5 calenders were also bought. 

Industrials / Materials

TIN – 4000 March 25 calls were sold at $0.60

RTN – Bearish activity: 2100 of the March 50 puts were bought to open for $0.67

Tech

ATVI – The May 12 Calls were bought 20,000 times for $0.28 vs 11.10 stock

GLW – 9500 April 24 / May 25 call spread was bought for $0.05 to open. It appears to be a roll of a bullish position from May to April, down one strike.

YHOO – Bullish long term play in Yahoo where 3900 January’13 15 calls were bought for $4.30 to open

Financials

CIM – 23,500 June 4.5 calls were sold at $0.05.

Healthcare

JNJ – 4500 January’13 75 calls were sold at $0.72

AVNR – 4100 June 3.5 calls were sold at $0.45.

*Special thanks to Flotilla Partners, Option Radar, BMO Capital, MEB Options, LiveVolPro, CBOE, Option Monster, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

Trade of the Day: 2,000 January $25/$15 bull risk reversals in EXPE

The Trade

A trader sold 2,000 Jan '12 $15 puts at $0.65 and bought 2,000 Jan '12 $25 calls at $1.50 for a debit of $0.85 or $170,000.

Risk/Reward

As you can see from the risk/reward graph above, the bull reversal profits from an increase in the underlying stock. The maximum risk is being put 200,000 shares of stock if the underlying stock is trading below $15. The maximum profit potential is unlimited because we are naked long calls. The upper break even price level is $25.85. At this price level, the long calls would get exercised which would exactly offset the debit to put on the position.

The line shown in the chart above is the upper break even price of $25.85. The 52-week range for EXPE is a low of $18.30 and a high of $29.85. EXPE released Q4 2010 earnings on February 10, 2011. Expedia Inc.'s fourth quarter earnings missed which resulted in a 12.65% decrease in shares prices in after-market trading on February 11, 2011.

Another big trade this morning included a trader selling 4,000 July $17 puts and buying the July $22/$27 ratio call spread for 2,000x4,000. As of 1:00 PM EST, EXPE has traded 30,070 contracts with an average volume of 7,769.

EXPE is the 3rd largest public travel company with a 6.15B market cap. CTRP and PCLN are the two larger companies and trade at significantly higher P/E ratios.

*Hat Tip to @OptionRadar for pointing this trade out to us!