HMY, CTSH Options – Unusual Trading Activity – May 17, 2013
This week we’re taking a look at unusual options trading activity in Harmony Gold Mining (HMY) and Cognizant (CTSH).
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:
Harmony Gold Mining (HMY)
A large trade occurred yesterday in HMY. Harmony is a mid-sized, South African gold miner.
HMY is currently trading for $4.08 per share. The stock’s down 54% year-to-date. The shares are right at the previous 52-week low of $4.09 and 62% below the 52-week high of $10.56.
An investor bought over 17,000 of the November 4/5 call spread for $0.26. That’s well over the average volume of 1,115 per day.
A call spread like this is a bullish position, and suggests the investor believes the stock is going to climb to $6 per share by November expiration. What’s interesting is that HMY is down on a very bearish period for gold.
Clearly, the investor doesn’t believe the current downturn in gold is going to hold . In fact, if HMY does rally to $6 or above, the trade could be worth over $1.3 million. The total risk is the cost of the trade, which is roughly $450,000.
Cognizant (CTSH)
A large block of puts were sold this week in CTSH.
CTSH is currently trading for $63.22. The shares are up 17% from the 52-week low of $53.92 and are 22% below the 52-week high of $81.08.
A block of nearly 8,700 June $62.50 puts were sold by a strategist for $1.65. The trade implies CTSH will remain above the strike price by June expiration.
It’s quite a risky play as the put sale wasn’t hedged at the time of the trade – either with shares or long puts at a lower strike. So, the trader must be confident the stock will remain around the current level or higher.
The premium, $1.65, is fairly robust with the options expiring in just around a month. However, the strike is very close to the current price of the stock. It will be interesting to see if CTSH holds this level.
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
