The iShares MSCI Emerging Markets exchange-traded fund (NYSE: EEM) is very busy this morning with more than 500,000 calls traded, twice as many as the daily volume average.
Almost all of this options trading was in what appears to be a call spread roll from April to May. A trader sold 99,999 of the EEM April 50 Calls for $0.50 while buying the same number of the EEM April 52 Calls for $0.04.
This volume was less than open interest at both strikes and appears to be the closing of a bullish call spread. The trader then bought 99,999 EEM May 51 Calls for $0.80 and sold 99,999 EEM May 53 Calls for $0.22. This was clearly a new opening bull spread.
The EEM trades this morning at $49.86, virtually unchanged from yesterday’s close, which was its highest since June 2008. Shares have run higher from a dip below $45 three weeks ago. Although this is tremendous volume, it basically amounts to the continuation of a large bullish position. The trader is now looking for the EEM to be above $53 by May expiration. Interestingly, despite EEM’s run higher, the April call spread was still out of the money.
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Meanwhile, Anadarko Petroleum (NYSE: APC) is trading near an all-time high, and one investor is getting nervous.
OptionMONSTER’s Depth Charge tracking program detected the purchase of 7,000 APC May 57 Puts for $0.18 against open interest of 2,285 contracts. The trade accounted for most of the activity in APC today, and drove the put/call ratio to a bearish 19 to 1.
The oil and natural-gas stock fell 0.58% to $82.29 in morning trading and has more than doubled since July. It touched an all-time high of $84 on an intraday basis in late March but since then has mostly closed down toward the $82 level. Some chart watchers may interpret that price action as evidence of selling pressure after the stock made such a big run.
Today’s put buyers are apparently looking for a significant drop in the near term. Buying far out-of-the money contracts is an inexpensive way to position for such a decline, but their investment will quickly lose all its value to time decay if it doesn’t move soon.
About 1,500 APC April 75 puts were also bought for $0.24, which expresses a similarly negative sentiment. Volume, however, was below open interest at that strike.
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