Traders scoop­ing up Equifax op­tions amid wild stock swings

The Globe and Mail (BC Edition) - - GLOBE INVESTOR - SAQIB IQBAL AHMED

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 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.

Equifax (EFX)

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


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