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Option Bear Sets Sights On Sirius XM Holdings Inc. (SIRI)

Sirius XM Holdings Inc. option volume surges on block trade

by 4/15/2014 8:16 AM
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Option Brief: Sirius XM Holdings Inc. (NASDAQ:SIRI) put volume ran at a more than three-fold mark-up to call volume yesterday. Against this backdrop, SIRI's 30-day at-the-money implied volatility (IV) again reached a 52-week high, and finished 4.5% higher at 42.9% -- indicating stronger-than-usual demand for short-term options.

The satellite radio issue's most active option, however, was the intermediate-term September 3 put, where 10,000 contracts crossed the tape -- all the product of a block trade that went off just before the noon ET hour. In fact, this lot accounted for almost two-thirds of the overall volume in SIRI's options pits on Monday.

Digging deeper, the puts changed hands at the ask price of $0.25, suggesting they were purchased. Also, IV at the strike ticked higher, and nearly all of the contracts translated to open interest, making it safe to assume the puts were bought to open.

Long story short, Monday morning's put buyer expects shares of Sirius XM Holdings Inc. (NASDAQ:SIRI) to dip below $3 by September options expiration, five-plus months from now. If they don't (and the trader opts to hold the block all the way through expiration), the individual will sacrifice 100% of the initial premium paid, or $250,000 (10,000 contracts * 100 shares per contract * $0.25 per contract). At yesterday's close, the stock was at $3.13.


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