Amazon.com, Inc. (AMZN) – 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.
Technology Select Sector SPDR (XLK) – 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.
Morgan Stanley (MS) – 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.