The Barchart platform is rich with tools and information for stock, option, and spread investors wanting to gain an edge in the market. 

One tremendous and easy-to-use feature is the ability to screen for important larger institutional options prints, as well as smaller, consistent, and forceful buying and selling of calls and puts. 

A Barchart screener can be very basic to accomplish this options sleuthing. 

To isolate critical transactions, use Barchart’s Options Flow and Unusual Options Activity pages on stocks. 

At the tail end of this past trading week, this simple and effective approach exposed Gilead Sciences (GILD) and Meta Platforms (META) as two top stocks with unusual options patterns worthy of exploring further.  

Gilead Sciences Capture the Dividend Activity

GILD was a top scanner stock this past Thursday due to its unusually heavy options activity. 

Contract volume of 155K was nearly 1,200% above the 3-month average. At the same time, a very lopsided put-to-call ratio of just .02 indicated almost exclusive activity in the calls. 

But it wasn’t a “call to arms” from bulls excited by GILD stock’s price chart or hopping on board an analyst upgrade as is often the case. 

The unusual options pattern in Gilead this past Thursday was to position in front of Friday’s fairly hefty $0.82 ex-dividend date. If lucky, the positioning is about as close to a free lunch on a stock as you’ll find.

To understand the dividend capture play, it’s easiest to think of an investor selling an out-of-the-money put. That is, if they are fortunate. 

Most often, and in the case of GILD stock, this activity is transacted as an in-the-money bull call spread on strikes with higher levels of existing open interest.

Traders making a play on the dividend want to remain short a call that’s hedged against long stock that’s been converted using a same-day exercise.

The crux of this positioning is whether the short or sold call contracts from all the verticals remain in your trading account the next day. 

No short calls on the sheets means there’s no exercised long stock either. Assignment results in the positions cancelling one another out. 

On the other hand, if a trader does find short call inventory on their sheets, it will match an equivalent amount of long GILD stock that it’s hedging. 

As the short call goes down in price by $0.82, without the obligation to pay another party, the final position is a buy-write that’s on the books for a credit of $0.82. 

On a risk basis, the buy-write is the same as selling the same strike put. 

As these spreads are transacted on strikes in which the put trades for much less than the quarterly payout and in general, little to no dollar value, the “capture” is the difference of the dividend and the put’s market price. 

In Thursday’s session, that translated into unusually heavy call activity in the March monthly contract and several strikes ranging from $100 to $135 versus a GILD stock price of $145.21.

So why isn’t everyone doing this? Depending on one’s account, there could be undesirable tax considerations. There could be commissions to consider as well. 

Lastly, the payoff, or lack thereof, rests on the shoulders of any call buyers from the existing pool of open interest which opted not to or forgot to exercise their positions into long stock.

That’s a big ask in general. And if there’s to be any unassigned short calls entering Friday’s ex-dividend, the allocation is lottery-style and overseen by the Options Clearing Corp.

At the end of the day, or rather before Friday’s opening bell, there were, as shown above, a few traders happy to have gotten away with selling puts synthetically and unperturbed by the Nasdaq’s broader and bearish posturing. 

META Stock’s OTM And Unusual Call Butterfly 

Diversified tech giant Meta Platforms is our next stock whose unusual options activity was noteworthy.

META didn’t quite make the top spot in any scans, but it did come in at No. 2 overall with options volume tracking 76% above its 3-month average. 

Also, premiums for calls and puts came in as the second highest IV/HV reading amongst the session’s top unusual volume candidates and just narrowly behind Tesla (TSLA).

Lastly, with a Put/Call stat of .60 and the lowest in this focused grouping of Nasdaq stocks, reviewing META stock’s Options Flow for stronger insight seemed approachable.

And in this instance, we were quickly greeted by a more significant, institutional-size spread. 

By sorting for “Size” on this Barchart page we can see that five transactions occurred simultaneously in Meta’s May call options.

Immediately, a spread comes to mind. 

Nearly as fast, it’s reasoned this is likely a trade that’s been broken up in pieces and appears more complicated than the reality. 

Most spreads have two, three, or four legs. But five? That would be very unusual options activity indeed!

Given that knowledge, it was time to look at the volume of the five transactions using Barchart’s Options Flow for META stock. 

And what was uncovered has the earmarks of a larger, consummated butterfly spread. 

When looking at the two pairs of 3K and 7K call contracts and the single largest 20K block of the session, a butterfly trade is born. 

As with any regular butterfly position, the two smaller but significant legs combine for 10K and hedge both sides of the larger center trade of 20K. It’s that recognizable 1:2:1 ratio of the infamous butterfly.

You can learn more about butterflies here. 

Still, while we Frankensteined these trades together into a more familiar creature, i.e., a butterfly spread, some may see it as ugly or not right. 

This particular butterfly is the correct ratio, but the $680 and $770 wings are not the same distance from the center $720 call strike. 

Those involved, of course, are likely to see it as a beautiful creation, albeit from vastly different vantage points. One side is a spread buyer and the other is a seller. 

But now both are married to this slightly askew or broken wing butterfly for $3.93, and ‘til death or expiration will they part ways. 

The Bottom Line

There’s a ton of options activity out there. But by taking advantage of Barchart’s scanning tools and doing a small bit of legwork, investors can gain powerful insights. And if you’re “lucky,” maybe introduced to a new trade that may send chills down the backs of others, but profits into your trading account.