CSX Options (CSX): Unusual Trading Activity

| August 23, 2012 | 0 Comments

Options in commodity based rail company CSX (CSX) showed heavy activity yesterday.

Before we get into what’s going on and how you can play it, keep this in mind…

During the next few weeks, there’s going to be a flood of options activity.  I believe this will be a result of heavy volatility coming back into the market, especially as election time ramps up.

Option traders’ goal… trying to capitalize on high volatility and inflated premiums.  And we’re continuing to bring you this option in real-time.

Yesterday CSX lit up the radar as the stock bounced off its support of $23 a share. 

So, with CSX testing its short term support, how are option traders setting up to profit?

During yesterday’s trading session, we saw 10,000 of the CSX November $25.00 strike call options trade hands.

They were purchased by a few traders at an average price of $0.18 a piece. 

And with commodities being so hot lately, there’s nothing to make me think that CSX will break support.  This will leave option traders with unlimited upside potential.

But why are they so excited about this company?

CSX is a $12 billion railroad company operating in the eastern United States.  On its 21,000 miles of track, CSX hauls shipments of coal products (32% of consolidated revenue), chemicals (14%), intermodal traffic (12%), and a diverse mix of other merchandise.

In addition, the company operates various distribution centers and storage locations. 

But wait, there’s more positive news…

CSX has improved operations significantly during the last few years.  On-time originations and arrivals, safety, dwell time in terminals, and velocity have steadily and significantly increased during recent quarters, extending trends that began in 2004.  And end users always like this!

Compared with trucking, shipping by rail is…

Less expensive for long distances, four times more fuel-efficient per ton shipped, and doesn’t contribute to freeway traffic volume.

Lastly, CSX is doing what it takes to improve its operating ratio. Starting with trimming more than one fifth of its management in 2003, CSX has driven down labor expense to about 26% of revenue in 2011.  This is now well below its peers and bodes very well for increased top line revenue.

For all these reasons and the obvious fact that commodities are so hot right now, CSX is the best way to play both the rail and commodity sectors.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.