Options Activity Alert: AMZN, XLK, MS

AMZN – Amazon.com, Inc. – Shares in the online retailer are up the most in the Nasdaq 100, trading 1.5% higher this afternoon at $195.20. Options traders expecting the bullish momentum to continue in the near term appear to be accumulating weekly call options. Weekly volume is heaviest at the Mar. ’30 $200 strike, where more than 4,300 contracts changed hands against open interest of 1,271 positions. Trading patterns reveal a roughly even mix of buying and selling. Fresh interest in the Mar. $205 strike call, however, is mostly driven by buyers. Traders positioning for shares to post big gains next week purchased the majority of some 3,500 calls in play at the $205 strike at an average premium of $0.72 each. Buyers of these contracts profit at expiration as long as Amazon’s shares rally another 5.4% to exceed the average breakeven price of $205.72. Bullish call buying extended up to the $210 weekly calls, as well, with roughly 650 contracts purchased for $0.31 a-pop. Overall options volume of 84,300 lots stands just below the AMZN’s 90-day average options volume of 87,480 lots. More than 2.5 calls are changing hands on the stock for each single put in play on the final trading session of the week.

XLK – Technology Select Sector SPDR – Options on the Tech ETF are among the most active today, with more than 114,000 contracts in play as of 12:15 p.m. in New York trade. Almost all of the options traded on the XLK are puts that appear to be tied up in a strategy that yields maximum gains in the event of a more than 6.0% pullback in the price of the underlying by April expiration. Shares in the XLK are currently off 0.25% to stand at $29.92 as of 12:25 p.m. on the East Coast. The bear put butterfly spreads accumulating in the April expiry options may be a protective hedge initiated by an investor locking in the % year-to-date gains in the ETF. Alternatively, the put ‘fly could be an outright bearish position established in the expectation that shares in the XLK will likely experience single-digit declines in the next few weeks to expiration. The strategist responsible for the hefty trade appears to have purchased 28,500 puts at each of the April $27 and $29 strikes, and sold 57,000 puts at the April $28 strikes, at a net premium of $0.09 per contract. The position may be profitable – or yield downside protection – at expiration if shares in the ETF decline 3.4% to breach the breakeven price of $28.91, while maximum potential profits of $0.91 per contract are available should the price of the underlying drop 6.4% to settle at $28.00. Shares in the XLK’s largest constituent, Apple, Inc., are down slightly more than the Tech SPDR this afternoon, trading 0.40% lower at $597.00. The put ‘fly may provide some protection against further near-term declines in the price of AAPL shares for an investor long the stock or with broader tech-sector exposure.

MS – Morgan Stanley – Activity in Morgan Stanley options suggests some traders are positioning for shares in the financial services provider to rally to their highest since August 2011 during the next five trading sessions. Shares in MS are currently up 3.0% at $20.17 just after midday in New York. Weekly call buying is heaviest at the Mar. ’30 $21 strike, where more than 5,000 contracts changed hands against 1,184 positions in the first half of the session. It looks like traders purchased most of the calls for an average premium of $0.17 apiece, thus positioning buyers to profit should Morgan Stanley’s shares climb 5.0% to top $21.17 by expiration.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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