Regular readers know that despite frequently commenting on unusual options activity, we generally don’t place a strong emphasis as it relates to our own trading as it nearly impossible to glean the reason for the activity we are commenting on. We do though find large seemingly directional blocks interesting from a sentiment standpoint, to get a sense for how investors and traders may be positioning prior to events, or to get a sense for how market participants view implied volatility levels for different securities.
Here was some untied directional activity that caught my eye today.
-RRC – appeared to be a bullish roll in the oil e&p company, when the stock was $21.24 a trader sold to close 10,000 Jan 35 calls at 15 cents, and bought to open 10,000 Jan 30 calls for 35 cents. In this instance I suspect the trader is looking to have a higher probability upside bet on, despite the break-even up 43% in a month. This is what you would call a lotto ticket, possibly leveraging an existing long position. While $30.35 break-even seems like a world away, its important to note that the stock was trading there is late November:
On the flip-side in the oil patch, there were also investors rolling down bearish or defensive views.
-WFT – the oil services company saw a bearish roll in February puts when the stock was $8.64. A trader sold to close 10,000 of the Feb 10 puts at 1.91, and bought to open 20,000 of the Feb 8 puts for 84 cents. These puts break-even at $7.16, just below the 52 week and 13 year low from August at $7.21:
And lastly one reason why I monitor unusual options activity is to get exposure to some stocks that are not on my radar.
-NSAM – I have never heard of this company before. Northstar Asset Management, which Bloomberg lists as headquartered in New York City, has a $2.2 billion market cap company, and as the name suggests is in the business of managing assets, they are a real estate investment trust, or a reit. The stock is down nearly 50% on year, but just this week bounced 10% off of a 52 week low made on Monday. There was some outright call buying in the stock today that stuck out like a sore thumb in a stock that only had 84,000 options of total open interest coming into the day. When the stock was $11.54 there was an opening buyer of 9,000 of the Jan 12.50 calls, paying 35 cents, which break-even at $12.85 in about a month. There are no scheduled events between now and Jan expiration.
Wow, look at this downtrend from its March highs. A re-test of the downtrend to $14 would make this call purchase very profitable on Jan expiration.