Stocks finished flat to lower on Tuesday, with U.S. oil supply data and concerns about a very weak earnings season applying pressure. The concerns didn’t seep too far into the options pits, as the CBOE’s put/call volume ratio rose moderately to 0.59 on the day. The 10-day moving average has held at 0.66 for the past three sessions. Among the day’s most active stocks in the options pits were General Motors Company (NYSE:GM), AT&T Inc. (NYSE:T) and Kraft Foods Group Inc (NASDAQ:KRFT).
General Motors Company (GM)
Shares of General Motors gave back about 2.5% on Tuesday amid reports that the Canadian government was about to sell its last 73 million shares in the company to Goldman Sachs Group Inc (NYSE:GS) for $2.7 billion. Canada acquired a major stake in GM during the 2009 bailout, and investors are now concerned with how Goldman will deal with the sizable stake, as returning these shares to circulation could dilute GM’s stock value.
As such, GM options made a rare appearance on yesterday’s most actives listing.
Some 95,000 GM contracts changed hands, well above the stock’s daily average over the past 21 trading days. The activity had a bullish bias, with 53% of the contracts trading as GM calls. Currently, peak April call open interest lies at the overhead $38 strike, where 24,270 contracts reside. However, another 12,000 contracts each are open at the deeper-out-of-the money April $39 and $40 strikes.
AT&T Inc. (T)
It’s dividend season as well as earnings season, with many blue-chip companies lining up to return a little cash to shareholders. Among those is AT&T, with its ex-dividend date set for today, meaning shareholders as of the close this afternoon will be eligible for a dividend of 47 cents per share. AT&T stock is also being driven by speculation that its merger with DirecTV (NASDAQ:DTV) could be imminent following an appeals court decision on the matter.
Judging by yesterday’s options activity, it would appear that dividend capture strategies are abundant on T stock right now. T saw options volume of 181,692 contracts on Tuesday, with 85% of that activity trading on the call side of the tap. Backing up the dividend capture theory, call open interest for T currently rests at deep out-of-the money strikes, with 38,160 contracts at the April $38 call and 22,622 contracts at the April $37 call strike.
Kraft Foods Group Inc (KRFT)
Prepackaged foods specialist and takeover target Kraft Foods Group is also going ex-dividend soon. The company will pay out 55 cents per share to shareholders of record as of the close on Friday. In merger news, H. J. Heinz Company, which is buying out Kraft, warned that Kraft employees should be prepared for disruption, as Heinz CEO Bernardo Hess slashed more than 7,000 positions when he took over his position at Heinz.
As with T stock, Tuesday’s options data for KRFT stock points toward dividend capture activity. Specifically, 99% of the record 219,839 contracts trading on KRFT crossed on the call side. A closer look reveals peak open interest at the April $95 strike, totaling 4,023 contracts, while another 3,865 contracts are open at the overhead April $90 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
