Stock tests lows, options volume tests highs

  • MGA options volume 500 times average on Monday
  • Stock tested its Oct.-Nov. lows last week
  • Commodities cool, gold rally takes a hit

Magna International (MGA) had traded more than four times its average daily volume by noon ET on Monday, but that wasn’t the stock’s main story—not by a long shot.

Even if they’d never heard of the Canadian auto parts manufacturer before, options traders probably couldn’t escape MGA yesterday, since it topped most of the LiveAction scans for unusual trading activity. By noon, total options volume was more than 118,000 contracts—roughly 500 times the daily average of 237. Two trades were responsible for the surge:

Chart 1: Chart 1: Magna International (MGA) June options, 4/22/24. Magna International (MGA) options chain. Large trades in both calls and puts.

Source: Power E*TRADE (For illustration purposes. Not a recommendation.)

With the stock trading between $48.41-$48.99 Monday morning, 50,000 contracts traded in the June $50 calls and $68,000 contracts traded in the June $47.50 puts—positions representing $250,000,000 and $323,000,000 worth of MGA stock, respectively.

These options weren’t priced at just a few cents, either. The calls traded for around $178 each (a total cost of $8,900,000), while the puts traded for roughly $205 (a total cost of $13,940,000).

Meanwhile, in the early afternoon the stock was up more than 1% for the day, trading near the upper end of the day’s range. That bounce followed more than three weeks of steady selling that dropped MGA to its October-November lows, which was as low as shares had been in a year:

Chart 2: Magna International (MGA), 7/25/23–4/22/24. Magna International (MGA) price chart. Trading near late-2023 lows.

Source: Power E*TRADE (For illustration purposes. Not a recommendation.)

It’s always impossible to be certain what a particular options trade represents, and the fact that Monday’s call and put trades weren’t the same size makes it even more difficult to make a connection between Monday’s options prints. But there were a few things traders could nail down:

•The volume was bigger than the open interest (OI) in both contracts, which suggests these were new positions
•Only three other contracts had volume of more than 100 (the maximum was 225)
•Only one contract had OI of more than 1,000 contracts (the June $55 put, with 2,400)

Finally, and perhaps most importantly, MGA is scheduled to release earnings a week from Friday (May 3). If these positions are still on the books then, some traders may have a great deal riding on those numbers.

Market Mover Update: A fifth-straight up day, Kellanova (K) is back to pressuring the top of its 2024 trading range (see “Time frame price perspective”).

Gold’s biggest down day of the year—an intraday decline of more than 2.75%—dropped the June futures price (CLM4) below $2,350. Two other commodities that have rallied strongly in recent weeks, cocoa and coffee, also started the week with pullbacks.

Eversource Energy (ES) closed at $59.69 last Friday, roughly in the middle of the profitability zone for a short April $60 straddle executed on April 4 (see “Breaking down a straddle”). With the $60 call expiring worthless, and the $60 put having an intrinsic value of $0.31 of intrinsic value, a short straddle trader’s net profit on a 1,629-contract position would have been roughly 2.19 (2.50-0.31), or $356,751.

Today’s numbers include (all times ET): PMI Composite flash (9:45 a.m.), New Home Sales (10 a.m.).

Today’s earnings include: Archer Daniels Midland (ADM), Freeport-McMoRan (FCX), GE Aerospace (GE), General Motors (GM), Halliburton (HAL), Kimberly-Clark (KMB), Lockheed Martin (LMT), PepsiCo (PEP), Spotify (SPOT), United Parcel Service (UPS), Enphase Energy (ENPH), Mattel (MAT), Tesla (TSLA), Texas Instruments (TXN).


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