As we head into the weekend and the second week of the Iran war, options volume is higher than usual. That’s not unexpected. If there’s one thing I’ve learned about the options market, it's that traders love volatility. 

In Thursday’s trading, the options volume was 66.03 million, about seven million higher than the average daily volume. A war will do that. 

With higher-than-normal options volume comes unusually active options. In yesterday’s action, the top 100 Vol/OI (volume-to-open-interest) ratios ranged from Southwest Airlines (LUV) at 131.81 for the top one to 28.77 for Strategy (MSTR), the 1ooth highest.  

Unmistakable was the interest in Rio Tinto (RIO), the London-based global mining giant that until yesterday was considering making an offer for Glencore (GLNCY) that would have created the world’s largest mining company. More on that later.  

Its share volume wasn’t too unusual -- 4.87 million compared to its average daily volume of 3.65 million -- but its options volume was off the charts -- 1.29 million on the day, over 17 times higher than its 30-day average. The next highest daily volume over the past 24 months was 308,315 in August 2025.

My Friday commentary centers around unusual options activity. Yesterday, Rio Tinto had 40 in the top 100 Vol/OI ratios, ranging from 56.89 to 31.33. And they were all calls; not a single put. 

There are several reasons for this, including the most obvious, which I’ll address shortly. But given the breadth of call options, I’ll consider the strategies institutional investors were using yesterday. 

Have an excellent weekend. 

Rio Tinto Ends Pursuit of Glencore

Until yesterday’s 10 a.m. announcement that Rio Tinto would not be making a formal offer for Glencore, investors were under the impression that the company might seek an extension of its Feb. 5, 12 p.m. ET deadline to clarify its intentions. That did not happen. 

According to Bloomberg, UK rules now prevent Rio Tinto from pursuing an acquisition of Glencore for at least six months. For the time being, the matter is closed. 

“‘It is possible that the two companies re-engage at some point in the future, but that is not our base case,’ Jefferies analyst Christopher LaFemina said in an emailed note. ‘Rio likely goes it alone,’” Bloomberg reported the analyst’s comments.

The two sides were unable to agree on the valuation and terms of a merger. Specifically, Glencore wanted 40% of the combined entity post-merger; Rio Tinto felt that implied a much higher premium than it was willing to pay. Glencore wouldn’t budge. End of story.

I must admit, I’m not a big follower of mining companies, but they’re most definitely front-and-center these days, given gold and other metal prices. 

Consolidation in the global mining industry will continue despite the end of this possible tie-up. Projects in the billions require massive scale. Mining is definitely not software. 

The Reasons for RIO Call Dominance

In addition to Rio Tinto ending its pursuit of Glencore yesterday, today is the company’s ex-dividend date for its final dividend of 2025. Payable on April 16, it is $2.54 a share, up from $2.25 a year ago. 

So, if you were long Rio calls, and the calls were ITM (in-the-money) or deep ITM, yesterday was the last day for you to exercise your right to buy RIO stock to be eligible for the April dividend payment. Its $ 4.02-a-share payout in 2025 was flat with 2024. 

Consider an institutional investor like Citigroup (C). As of its most recent 13F filing, it owned 1.5 million shares of Rio Tinto, with an additional 287,500 shares held through call options. That’s $730,250 in dividends it’s leaving on the sidelines if it doesn’t exercise those options.

Here are the five unusually active call options from yesterday’s trading that also had the highest volume.

As you can see, they’re all ITM, with three expiring in three weeks from today, and two in six weeks. I’m going to focus on the two deepest ITM, the March 20 $75 call and the April 17 $75 call. 

Looking at the options flow, the March 20 $75 call had 23 trades of 1,000 contracts or more yesterday, accounting for 82% of the 112,881 total volume. The April 17 $75 call had 7 trades of 1,000 contracts or more yesterday, accounting for 52% of the 72,562 total volume. 

Many of the trades were at the bid price, indicating selling pressure, as buyers of these calls looked to book gains on their options. The closing bid price at the end of yesterday’s trading for the $75 calls expiring on March 20 and April 17 was $17.60. The trade prices so far on Friday morning for the earlier DTE are around $15. There’s no volume for the April 17 $75 call with bid and ask prices of $15.20 and $15.80, respectively.

Because the March 20 expiration is four weeks earlier, the bid and ask prices have fallen by 50-60 cents more than the April 17 expiration.

So, as far as I can tell, much of the call action yesterday involved longs exiting their positions rather than exercising their calls to capture the dividends. However, the OI (open interest) today is 193,175, 14% lower than a day earlier, indicating calls were exercised. 

The Covered Call Was Popular

For investors who already owned Rio Tinto shares heading into yesterday’s trading, writing Covered Calls for income made a lot of sense, given the higher bids available. However, you would likely have to sell the shares to the buyer at expiration because the strike prices were so deep ITM.

The ideal DTE for covered calls is generally 30 to 45 days, providing better income, but not too much time decay, so that you can profit from the trade, either by exiting the position, or the calls expiring worthless. 

In yesterday’s situation, the latter scenario wasn’t possible with most of the unusually active options deep ITM. So, let’s focus on the unusually active calls expiring in 43 days, on April 17, with Vol/OI ratios of 28.77 or higher.

As mentioned, all of these are significantly ITM, so you’d likely have to sell your shares in April. Given the $80 call had 138,841 in volume yesterday, let’s consider that strike price. 

Based on the information above, let’s assume you bought 100 shares of Rio Tinto a year ago for $6,400, or $64 a share. You received $12.70 in premium yesterday for selling one $80 call. That lowered your net cost per share to $51.30. 

Now, assume the shares remain flat between now and then and are called away at expiration in April. You would receive $8,000 ($80 a share) plus $1,270 in premium, for $9,270. Your return would be 44.8% [$9,270 - $6,400 / $6,400], or 40.1% annualized [44.8% * 365 / (365 + 43)]. That’s less than the 45.9% return (41.1% annualized) achieved without selling a call.

However, now let’s assume the shares fall to $80 by April 17. They likely expire worthless. You pocket the $1,270 in premium for an annualized return of 40.1%, considerably higher than 22.4% without selling a call. 

So, by selling calls deep in the money, you were protecting your downside, while capping your upside. Given the shares have gained 41% over the past 12 months, and Rio Tinto is prepared to go it alone, that seems like a wise bet. 

While most of yesterday's volume was likely institutions rolling over their covered calls—buying their existing calls to close and selling new ones to open for income with higher strike prices and further-out expiration dates—some exercised their calls to capture the April dividend. 

Both are bullish despite the negative net trade sentiment.

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