EWJ, BBY Options – Unusual Trading Activity – September 6, 2013
This week we’re taking a look at unusual options trading activity in iShares MSCI Japan Index (EWJ) and Best Buy (BBY).
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:
iShares MSCI Japan Index (EWJ)
A large block put spread traded this week in EWJ, the most popular Japan index ETF.
EWJ is currently trading for $11.28 per share. The share price is 31% above the 52-week low of $8.62 and 9% below the 52-week high of $12.38.
One strategist purchased the September/October 11 put spread 50,000 times for $0.11. A trade like this is called a calendar spread because it covers more than one expiration month.
The put calendar could be serving several purposes for the trader. It could be a longer-term hedge on a long position. It could be a moderately bearish bet on Japanese stocks overall. Or, it may even be a bullish bet on volatility going up in Japan. Calendar spreads are complex in that they could potentially serve multiple uses for the owner of the spread.
Best Buy (BBY)
A trader is expecting BBY to head lower around December earnings time.
BBY is currently trading for $37.49 and is up 221% so far for the year. The shares are up 239% from the 52-week low of $11.04 and are just 1% below the 52-week high of $37.98.
This week’s trade saw 4,700 December 30 puts get purchased while 10,000 December 23 puts were sold at the same time. This put ratio spread cost roughly $0.50 overall.
The trader is expecting BBY to drop below $30 by December expiration, possibly due to earnings (which occur that month). However, the put spread buyer also is fairly certain the stock won’t drop below $23. The put ratio spread is a way to reduce the cost of the 30 puts while believing a floor exists on how far the shares could fall.
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
