BKD, EEM Options – Unusual Trading Activity – February 24, 2014
This week we’re taking a look at unusual options trading activity in Brookdale Senior Living (BKD) and iShares MSCI Emerging Markets ETF (EEM).
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:
Brookdale Senior Living (BKD)
A large trade suggests BKD’s recent surge is going to continue higher.
BKD, an operator of senior living communities, is currently trading for $30.91 per share. The share price is 27% above the 52-week low of $24.42 and is just 5% below the 52-week high of $32.38.
At the end of last week, a 2,500 block of March $32.50 calls were purchased for $0.50. By the end of the day, over 4,000 contracts were traded, suggesting others were piggybacking on the original trade.
The calls will be profitable if the shares close above $33 by March expiration. The open interest on the strike was zero before the trade, so this is definitely a bullish, opening trade on the company.
iShares MSCI Emerging Markets ETF (EEM)
A massive trade implies the crisis in emerging markets may be easing.
EEM, the most popular emerging markets ETF, is currently trading for $39.69. The shares are up 12% from the 52-week low of $35.37 and are 11% below the 52-week high of $44.43.
Traders sold a whopping 162,000 June $32.50 and $37.50 puts for a total of $1.00. When two parts of a vertical spread are bought or sold at the same time, it’s called a put/call stupid.
This strategy suggests the emerging markets selloff is at an end and volatility may be easing. It doesn’t necessarily mean the ETF is going to shoot back up. However, the trade will succeed as long as the shares don’t plunge through both strikes.
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
