AEO, SD Options – Unusual Trading Activity – December 18, 2013

| December 18, 2013 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in American Eagle Outfitters (AEO) and SandRidge Energy (SD).

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:

American Eagle Outfitters (AEO)

Does AEO have some upside potential despite lowering guidance next quarter?  At least one trader believes so.

AEO, a popular apparel chain, is currently trading for $14.21, down 30% for the year.  The share price is 8% above the 52-week low of $13.14 and is 36% below the 52-week high of $22.28.

This week, a ‘sweep’ trade occurred in AEO, which basically means several strikes were taken out at once.  In this case, the May 19, 20, and 21 calls were bought for a total of roughly 10,000 contracts.

There’s almost no way for this to be anything but a purely bullish trade.  AEO hasn’t performed well of late, but the company is profitable and has a strong balance sheet.  Perhaps these trades are a sign of the company’s upside potential in the first half of 2014.

SandRidge Energy (SD)

If options action is any judge, SD has a moderately bullish future ahead.

SD is trading at $5.52.  The shares are 22% above the 52-week low of $4.52 and are 26% below the 52-week high of $7.47.

A trader sold 10,000 May 5 puts and took in $0.37 per contract.  This is a moderately bullish play because the trader holds on to the entire premium if the stock closes at or above $5 at May expiration.

A put sale like this also implies the trader would be willing to purchase the stock for $4.63, should it fall from current levels.  That’s very near the 52-week low, so this is a relatively safe trade despite being short naked puts.

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

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.