It was a sour end to the week for the major market indices, with the S&P 500 index logging its second consecutive weekly loss Friday. Weakness in stocks led to diminished interest in call options on the CBOE, as the exchange’s put/call volume ratio rose to a one-month high of 0.67. The 10-day moving average also hit a monthly high, arriving at 0.63.
Among the top-10 most active stocks in the options pits were Apple Inc. (NASDAQ:AAPL), General Motors Company (NYSE:GM) and — in a rare appearance — Darling Ingredients Inc (NYSE:DAR).
Apple Inc. (AAPL)
Apple stock rose nearly 1% on Friday, bucking the downtrend on Wall Street, following news that the world’s most valuable company’s would finally be joining the Dow Jones Industrial Average. AAPL stock is booting blue-chip communications firm AT&T Inc. (NYSE:T) from the Dow 30, which is a bit ironic in that AT&T is where Apple’s iPhone got its start in the U.S.
Options traders were keen to place bullish bets on AAPL stock, despite the shares languishing beneath short-term resistance near $130. Overall, some 1.6 million contracts traded on AAPL stock, with 64% of those crossing on the call side. Among short-term activity, the weekly March 13 series has been quite popular, with the overhead March $130 strike attracting peak open interest of 26,196 contracts. The March $128 is a close second, with 20,121 contracts in open interest.
General Motors Company (GM)
In a move designed to avoid a proxy fight, General Motors announced Friday that it is planning a significant share-buyback program to return billions to shareholders. On the news, activist investor Harry Wilson reportedly dropped a prior request to join GM’s board. Wilson had been critical of GM’s management and share price.
Options traders, keen to position themselves ahead of any such buyback plans, snapped up GM calls at a record pace on Friday. Options data from Avafin.com reveals that GM call volume hit a 90-day high on Friday, with 35,160 puts trading, versus 233,270 calls, resulting in a single-session put/call volume ratio of 0.15.
One particular GM options anomaly that its worth noting is that there are exactly 5,350 calls open at both the out-of-the-money weekly March 13 series $45 strike and the deep in-the-money March $45 put. While it is impossible to tell what the trader is planning without additional data, it would appear that both of these positions are related. The $45 strike is currently about seven points above GM’s close on Friday.
Darling Ingredients Inc (DAR)
Darling Ingredients stock took a header last week, with shares plunging more than 14% on Thursday and Friday. The selloff appears to be related to Darling’s fourth-quarter earnings report, where quarterly earnings and revenue arrives in line, but guidance was cause for considerable concern. In fact, Goldman Sachs downgraded the stock to “neutral” from “buy” following the report, providing additional fuel for the fire.
Not surprisingly, options traders responded to the news with a flood of puts. In fact, 99% of the 118,846 contracts trading on DAR changed hands on the put side of the tape. Currently, the most popular put is the March 17 strike, where 12,110 contracts are currently open. Following at a distant second is the July 15 strike, where 7,093 put contracts are currently open.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
