AMD, MRO Options – Unusual Trading Activity – February 15, 2013
This week we’re taking a look at unusual options trading activity in Advanced Micro Devices (AMD) and Marathon Oil (MRO).
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:
Advanced Micro Devices (AMD)
An unusual amount of option activity was detected in AMD yesterday. Bearish put option volume of 21,000 contracts outpaced the 5,000 call options.
AMD is currently trading for $2.75 per share. The stock is up 52% after reaching a 52-week low of $1.81 last November. But the stock is still more than 67% off the 52-week high of $8.35.
A trader bought 18,000 of the April 2013 $2 puts for 7 cents. That’s a $126,000 bet on significant downside in AMD. In order for the trader to breakeven on the trade, they need AMD to fall nearly 30% to $1.93.
Anything below $1.93 will net the trader a profit. But if AMD stays above $2 through the April expiration, these options will expire worthless.
The expiration of the options is just days after AMD reports their next quarterly earnings. This trader is clearly betting on AMD falling short of analysts’ expectations. He’s hoping the poor quarter will send the stock plummeting back toward the 52-week low.
If AMD falls to $1.81 at expiration, these options will jump in value to 19 cents. And the trader will pocket a cool $216,000. Not a bad trade… it will be interesting to see how this one plays out.
Marathon Oil (MRO)
Our tracking system detected bullish options activity in MRO today. And for good reason… Energy stocks have been on fire lately!
MRO is currently trading for $34.60. The shares are pushing new 52-week highs and are up more than 50% from the 52-week low of $22.90.
One bull is locking in gains and expecting the run to continue…
A trader sold 4,000 of the April 2013 $31 calls for $4.30 and bought 4,000 of the April 2013 $35 calls for $1.32. It appears that the trader rolled their long call position to a higher strike.
In essence, he used part of the proceeds from the sale of the $31 strike calls to fund the purchase of the $35 strike calls. So he’s still bullish on MRO. But he was also able to take some took some profits off the table.
This looks like a smart trade to me. I can’t blame the trader for locking profits on MRO. The stock has had a great run so far this year. But the stock is approaching the 52-week high and we’ll likely see some selling pressure at this technical level.
But don’t forget, the entire energy sector is soaring. The sector wide updraft will likely overwhelm the moderately bearish technical setup in MRO. So picking up the higher strike call options could deliver a big pay day to the trader if MRO continues to run.
Any way you slice it, this trader is likely to come out ahead now that they’ve taken some profits off the table by rolling to the higher strike option.
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!
Safe Trading,
Marcus Haber
Category: Unusual Options Trading Activity
