ABX, AGNC Options – Unusual Trading Activity – June 7, 2013
This week we’re taking a look at unusual options trading activity in Barrick Gold (ABX) and American Capital Agency (AGNC).
As many of you know, unusual options volume can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.
This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.
So let’s take a look at some ‘interesting’ activity that caught our eye this week:
Barrick Gold (ABX)
It looks like an investor is long-term bullish on gold. A very large call spread traded this week on large cap gold company, Barrick Gold.
ABX is currently trading for $21.13 per share. The stock’s down 39% year-to-date. The shares are 22% above the 52-week low of $17.33 and 50% below the 52-week high of $42.21.
An investor bought over 20,000 of the January 25/35 call spread for $1.66. The trade costs over $3.3 million, so the trader is definitely making a substantial commitment, likely for the long haul.
A vertical call spread like this is a bullish position, and suggests the investor believes the stock is going to climb to $35 per share by January 2015 expiration. While the upper strike is nearly $15 away, there’s also 18 months to go before expiration.
Gold has been trending down lately, but at least one big trader is not convinced the move is long-term.
American Capital Agency (AGNC)
A large, short-term trade happened this week in AGNC, a residential mortgage REIT.
AGNC is currently trading for $26.20. The shares are up just 5% from the 52-week low of $25.01 and are 21% below the 52-week high of $33.31.
One strategist grabbed 10,000 June 23 puts for $0.32. At the same time, the trader bought 240,000 shares of AGNC stock at $25.53. Based on the options’ June expiration, this looks like a short-term trade (although there’s no way to know what the trader will do with the shares).
Basically, the strategist is expecting AGNC to move by June expiration – it doesn’t matter which direction. The stock will make money on a move higher and the puts will make money on a move lower.
The worst case scenario for the trader is if the stock price closes between $23 and $25.50. However, this strategist clearly believes REITs are getting ready to move much higher or lower in the next couple weeks.
More Options Ideas…
That wraps up this week’s unusual options trading and volume…
Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.
We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!
So keep an eye on your email inbox… we have a lot more options trading ideas coming your way!
Yours in Profit,
Gordon Lewis
Category: Unusual Options Trading Activity
