JRCC, MNKD Options – Unusual Trading Activity – May 24, 2013
This week we’re taking a look at unusual options trading activity in James River Coal (JRCC) and MannKind (MNKD).
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:
James River Coal (JRCC)
Coal companies continue to see a fair amount of bullish activity in options. This week, a sizeable bullish trade occurred in James River Coal.
JRCC is currently trading at $3.11 after climbing nearly 40% over the past week. But for the year, the stock’s still down 3%. Shares are trading 113% off the 52-week low of $1.46 and are 47% below the 52-week high of $5.89.
One investor purchased the July 3/3.50 call spread for $0.20. The spread traded 2,000 times. Open interest in the two strikes was a mere 300 contracts, so this is obviously a new position.
This kind of call spread is a bullish position hitting maximum profits if the stock closes above $3.50 at July expiration. With the buyer only paying $0.20, it’s a relatively low risk play. Not to mention, the stock only needs to climb $0.40 to hit the upper strike.
Max gain on the position is $0.30 per spread, or $60,000 for the entire position.
MannKind (MNKD)
A large call trade hit the options market this week in biotech company, MNKD.
MNKD is currently trading for $6.23. The shares are up an impressive 294% from the 52-week low of $1.58 and just climbed passed the old 52-week high of $5.45 by 14%.
A huge call spread traded in the January 2014 expiration chain. The January 2014 5/9 call spread traded 29,864 times for a price of $1.15.
Judging by the open interest, this isn’t a call vertical spread, but instead a roll trade. That means the trader was likely short the January 5 strike versus long stock (a buy-write). And, he or she is cashing out of the 5’s and rolling the trade up to the 9 strike.
Most likely, the trader is now long MNKD stock versus being short the January 9 strike. The trade is maximized if MNKD closes right at 9 on January 2014 expiration. Keep in mind, the trader will keep the short call premium as long as the stock doesn’t shoot past 9 and stay there through expiration.
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
