KO, XLK Options – Unusual Trading Activity – August 18, 2014
This week we’re taking a look at unusual options trading activity in Coca-Cola (KO) and Technology Select Sector SPDR ETF (XLK).
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:
Coca-Cola (KO)
One trader sees additional upside in KO over the next month.
KO is currently trading for $41.34. The price is 15% above the 52-week low of $36.01 and is 3% below the 52-week high of $42.57.
A trader purchased 4,500 September 41.50 calls for the price of $0.31, while at the same time selling 4,500 September 42.50 calls for $0.08. This bullish call spread cost a total of $0.23, which is the maximum amount risked on the trade.
Typically, you don’t see such narrow spreads being traded. However, KO isn’t a very volatile stock, so it does make sense in this case. Also, a $0.77 max gain isn’t too shabby for a low risk trade such as this.
Technology Select Sector SPDR ETF (XLK)
At least one trader believes the tech sector is going to finish strong this month.
XLK, a popular tech sector ETF, is trading for $39.63. The shares are just 1% below the 52-week high of $40.08 and 29% above the 52-week low of $30.71.
Nearly 3,000 Weekly calls were bought which expire on August 29th with a strike price of 40. The calls cost just $0.12 each and are definitely an opening position (based on previous open interest).
XLK would have to break above its 52-week high in less than two weeks for these calls to pay off. However, at a price of only $0.12 per contract, it seems like a reasonable risk to take for a bullish position.
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
