INFI, AMTD Options – Unusual Trading Activity – April 12, 2013

| April 12, 2013 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in Infinity Pharmaceuticals (INFI) and TD Ameritrade (AMTD).

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:

Infinity Pharmaceuticals (INFI)

An unusual amount of option activity has been detected in INFI. Yesterday, traders had traded over 7,600 contracts on the stock. That’s triple the daily average.

INFI is currently trading for $42.81 per share. That’s 15% off the 52-week high (the highest the stock has been in 12 years!) but a substantial 288% higher than the 52-week low of $11.02.

One trader sold 3,000 May $35 puts for $0.80, plus another 1,000 lot for $0.75. With the open interest on the strike just over 1,100 prior to the trades, these are clearly opening positions.

The bullish/neutral play implies the trader expects INFI to remain above $35 per share through mid-May. If it happens, the trader will collect all the premium from the options. If not, the trader will be forced to purchase shares of INFI at the lower price.

I believe this a very smart play. INFI dropped from its high because the company priced a 10 million share secondary offering at $40 per share. As such, it makes sense that the stock dropped to around $40.

However, there’s no reason to think the share price will continue falling. In fact, it has already rebounded somewhat from the lows.

TD Ameritrade (AMTD)

Our tracking system has detected large call buying on the online brokerage company.

AMTD is currently trading for $20.24. The shares are up 40% from the 52-week low of $14.45 and are currently 6% below the 52-week high of $21.56.

This week, two massive blocks of calls traded in AMTD. The Jan 2014 $26.50 calls traded a total of 29,000 contracts for $0.275. That’s compared to average volume of 5,289 contracts per day.

Open interest was only 85 contacts on the strike. So, it’s definitely an opening trade.

The call purchases imply that the buyer expects the stock to climb significantly from its current level by January of next year. In fact, it would take over a 30% move in the stock for these options to be in-the-money.

The trade becomes profitable if AMTD closes above $26.78 by January 2014 expiration.

AMTD appears to be fairly valued at the current level, so the buyer must believe the large retail broker is set to have a very good 2013. With the economy slowly improving, it does make sense for this type of business to show gains.

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

 

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.