CSX Options (CSX): Unusual Trading Activity

| April 16, 2012 | 0 Comments

Options in commodity-based rail company CSX (CSX) are showing heavy activity today.

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

Over the next few weeks, there’s going to be a flood of options activity.  As earnings swing into full gear, professional traders are going to be taking speculative positions as fast as they can.

Their goal… trying to capitalize on high volatility and inflated premiums.

Now back to CSX…

This morning CSX is lighting up the radar as earnings are on-deck for tomorrow after the close.

So, with CSX reporting earnings tomorrow afternoon, how are option traders setting up to profit?

During Friday’s trading session, we saw close to 23,000 of the April $22.50 strike calls trade hands.

And with CSX trading higher this morning even with the S&P down fractionally, option traders are adding to their positions.

It’s still early in the trading session, but those same April call options are still being purchased for around $0.25.

With CSX’s stock price stagnant, if they beat analysts’ expectations, the stock will soar… rewarding option traders with huge profits.

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.

Lately, CSX has reported a slew of positive news…

For one, they have been able to trim operating and labor expenses down 8% from 34% in 2004 to only 26% in 2011.  And analysts expect this to continue to fall as revenues grow.

In addition, CSX primarily serves the eastern United States.  With two-thirds of the country’s population living there and with gas prices rising, shipping by rail is less expensive for moving goods long distance.

And best of all, it doesn’t contribute to freeway traffic!

For all these reasons, and the obvious fact that commodities are 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.

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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.