Monday, December 22, 2008

On Friday, options expert Rebecca Darst said which bank's downside had "far outpaced the decline" in the financials?


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Question: On Friday, options expert Rebecca Darst said which bank's downside had "far outpaced the decline" in the financials?

Answer: HSBC

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Option Activity: Apple and Big Banks

Option expiration days are usually volatile days on the stock market, and this week, there has been some unusual activity in HSBC , JPMorgan Chase and Apple .

"The put activity in HSBC really picked up on Wednesday, when it started to get some negative analyst attention," NYSE Euronext managing director Rebecca Darst told CNBC. "Yesterday (Thursday), HSBC's downside far outpaced the decline in the broader financials, and yet we saw traders buying into December $45 puts."

Unique, in that the buying came just a day before those puts were to expire.

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"This was some significant share-price positioning," she said. "Obviously, some traders feel that it is worth protecting against a break of HSBC's 52-week low, which would have to happen today."

JPMorgan Chase options have been active for several days, usually in the last half-hour of trading.

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HSBC Holdings
JPMorgan Chase
Apple
"We have seen some significant interest in the June 22.50-30 put spread," Darst said. "They are buying the 30 puts and selling the 22.50s in order to fund that transaction; that carries about a 3.30 debit on the transaction, which is going to require a 12 percent decline for JPMorgan share price."

Darst said she rarely watches Apple options, because they are so liquid that it is hard to detect directional plays. This week, though, one big move on Thursday drew her attention.

"We saw a 10,000-lot transaction go through to the middle of the market in April 80 puts," she said, adding, "It was an opening transaction; we don't know if these were bought or sold; and we did notice that, earlier in the week, there was a real prevalence among option traders to sell downside puts."

Disclosures:

Darst's husband is an employee of JPMorgan Chase.

Disclaimer

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