The broader market indices took it on the chin Friday, with the S&P 500 dropping by 0.77% to finish below its 50-day simple moving average. Threats of a stalemate in Greek debt negotiations and increased worries of the Fed lifting its zero-interest-rate policy (ZIRP) sooner rather than later were largely responsible for the shift in technical market momentum to the downside.
Click to Enlarge
Looking into Friday’s most active equity options, household and heavy volume favorites Netflix, Inc. (NASDAQ:NFLX) and Bank of America Corp (NYSE:BAC) saw heavier-than-normal action, while Chesapeake Energy Corporation (CHK) managed a rarer spot on the list with bearish, news-driven order flow.
Let’s look at the action in each of these heavily traded stocks:
Netflix, Inc. (NFLX)
Taking a closer examination at Friday’s targeted threesome, Netflix saw continued heavy volume on the week as 368,000 contracts changed hands on more than three times its average option activity. Positioning was largely split, but call action leading with a share of 54% of the day’s contracts trading.
The fairly even bull vs. bear tug of war in Netflix options was largely one left to its own devices, as fresh news acting as a company-specific driver was largely absent.
On the other hand, the backdrop of the broader market under pressure Friday, as well as the fact that shares of NFLX stock are just removed from Wednesday’s all-time-highs and earlier speculation this week of a looming stock split announcement following an announced 5 billion share authorization, could be viewed as countering supports for bulls and bears.
Breaking down the activity in NFLX options, the most heavily traded contracts were on the closing at-the-money June $660 strike. Calls and puts saw very similar action in keeping with the overall put/call ratio on tallies of about 1,500 contracts apiece. The straddle value closed $18.30 mid-market.
Bank of America Corp (BAC)
Bank of America calls and puts traded more than 368,000 contracts on greater than double its average volume. Calls led by slightly more than a 2-to-1 margin over puts. Behind the bullish-looking action, as well as shares of BAC managing to finish flat on the session at $17.49: An article in the Wall Street Journal suggested the bank “may dodge a legal bullet” following fellow banker Deutsche Bank AG (USA)’s (DB) legal victory over financial-crisis-related mortgage claims.
Zeroing in on BAC’s most active options, the at-the-money and slightly out-of-money June $17.50 and $18 calls banked 8,000 and 6,600 contracts respectively. Similarly, the same contract strike puts registered volume of 2,650 and 3,400 and largely in keeping with the overall heavier call activity on the session. The straddle value on the at-the-money June $17.50 closed at 36 cents with one week to expiration.
Chesapeake Energy Corporation (CHK)
To round out our top three options activity leaders, Chesapeake Energy makes the list after drawing in volume of more than 102,000 CHK options contracts. The trading amounted to more than 2.5 times its daily average and reflected action favoring protective portfolio hedging and/or bearish wagers in the puts.
Shares dropped 2% to fresh 52-week lows of $12.25 and the oil and gas outfit’s lowest stock price since December 2008 during the height of the financial crisis.
Behind the pressure in CHK stock and large put activity, bearish technical momentum and modestly weaker oil prices following reports that Saudi Arabia — now the world’s second largest oil producer behind the U.S. — may increase its supply as part of a deal with Indian buyers.
Of particular interest in CHK options, the July $13 call saw volume of 2,670, while the front month at-the-money June $12.5 call traded a bit more than 1,500 contracts. And on the put side, the narrowly out-of-money June $12 put — the session’s clear volume leader and squarely in keeping with the overall put/call ratio — rang up nearly 5,800 contracts.
With shares of CHK centered between the $12 and $12.50 strikes, the June strangle finished at 44 cents with five trading days left to expiration.
As of this publishing, investment accounts under Christopher Tyler’s management do not own positions in any of the securities or their derivatives mentioned in this article, but may initiate in the future at their discretion. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
