DISH, F Options – Unusual Trading Activity – November 30, 2012
This week we’re taking a look at some very unusual options trading activity in Dish Network (DISH) and Ford Motor (F).
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:
Dish Network Options (DISH)
Satellite television operator Dish Network (DISH) is experiencing a large amount of trading activity this week. Option volume has spiked to 4x the daily average today. And nearly 70% of the new trades are calls.
DISH provides its Dish Network television service to around 14 million US subscribers through a network of 15 in-orbit satellites.
They market its services under the premise they’re the lowest all-digital price in America. They typically offer cheaper prices for basic television packages than the competition.
They’ve also made multi-billion dollar investments in wireless spectrum as the company builds one of largest wireless networks. They plan to provide mobile video and other wireless services. Their spectrum assets are valued at more than $6 billion.
Over the last year, shares of DISH have rallied 50% from a low of $24.36 to a new 52-week high of $36.68. And one trader is playing for even more upside.
The trader purchased 2,000 January $37 calls for $1.71. And they sold an equal number of the January $35 calls for $2.77 against existing open interest at the same time.
This indicates the trader closed out a winning trade and rolled to a higher strike.
By rolling the option to a higher strike, they took $1.06 per contract or $212,000 off the table. And they’re still in position to make more on January $37 calls if DISH continues to rally.
Is this a good call?
It’s never a bad idea to take profits off the table. And this trade netted them a cool $212,000. And they still have upside if the stock continues to move higher.
However, DISH’s plan to convert 40 megahertz of satellite spectrum into frequencies for a nationwide mobile broadband service could be derailed by the FCC.
It could create some uncertainty about the future growth of the company. And uncertainty is never good for a stock.
However, DISH could end up selling their spectrum assets and could end up with $6 billion in cash. Money that could be used to buy back stock, pay a dividend, or create shareholder value in some other way.
No matter how the FCC rules on DISH’s spectrum plans, this trader is looking for more upside in DISH. And judging by the stock’s recent performance, it’s hard to argue with them.
Ford Motor Options (F)
Option volume on Ford Motor (F) surged higher today.
Shares of the second largest US motor vehicle manufacturer are currently trading for $11.39 per share. The shares have rallied 30% off the 52-week low of $8.74 over the last four months. But the shares are still down more than 11% from the 52-week high of $12.85.
F has done a good job of introducing new vehicles and gaining market share in recent years. But they face stiff competition from Asian manufacturers and General Motors (GM).
We’ll see how the company is doing when they update sales progress on Monday.
According to our tracking system, option traders are expecting more upside in F. Over the last two days, call option volume on the December $12 calls surged to 30,000 contracts and the January $12.50 calls have had 25,000 change hands.
Obviously, when traders are buying call options, they’re expecting F to continue moving higher.
Does F have more upside?
The overall trends in US auto sales are certainly bullish. Demand for new vehicles is expected to increase year-over-year in 2012 and 2013.
F has about 12% of the US market. If they maintain or grow their share of a growing market, it should fuel more upside in the stock.
If Ford reports strong sales trends on Monday, the stock will likely surge and the traders who bought call options this week will be ringing the cash register with a sizeable gain.
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
