Traders scooping up Equifax options amid wild stock swings
The heightened drama in Equifax Inc.’s shares after the creditreporting company last week disclosed a massive data breach has turned its sparsely traded options contracts into one of the busiest names in the U.S. options market.
Equifax shares have shed nearly a third of their value since Sept. 7, when the company said personal details of as many as 143 million U.S. consumers were accessed by hackers between mid-May and July in what could be one of the largest data breaches in the United States.
The shares tumbled further on Thursday to a more than 21⁄2-year low of $89.59 (U.S.) after the U.S. Federal Trade Commission said it has opened an investigation into the breach.
Volume of more than 23 million shares by early afternoon was already a record for any single day dating back to the company’s market debut in the early 1970s.
Equifax options had traded about 110 contracts a day this year before last week’s disclosure, but over this past week the options have notched an average daily trading volume of nearly 50,000 contracts, according to data from New York-based options analytics firm Trade Alert.
“We are looking at a huge spike in activity. Equifax has really gone out of the frying pan and into the fire,” David Russell, senior manager at online broker E*Trade Financial Corp., in Chicago.
“It’s gone from a quiet buy-and-hold kind of name to a very actively traded company and it’s happened very fast.”
Thursday was the busiest day yet, with options trading volume hitting 127,000 contracts by early afternoon.
Equifax options were the fourth-most actively traded single-stock name in the options market, ahead of market favourites such as Tesla Inc., Facebook Inc. and Amazon.com Inc.
Traders were buying Equifax puts that would protect against a big slip in the share price over the next month, Trade Alert options analyst Fred Ruffy said in a note.
Contracts that guard against the shares dropping below $60 by mid-October were particularly busy. (A put contract gives the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a certain time.)
Trading was not restricted to hedging activity as traders also took to the options market trying to profit from the wild gyrations in the stock price.
“Options traders like volatile, liquid stocks and suddenly Equifax is in that camp,” Mr. Russell said.
Close: $96.66 (U.S.), down $2.33
We are looking at a huge spike in activity. Equifax has really gone out of the frying pan and into the fire. David Russell Senior manager at online broker E*Trade Financial