LCC, XLB Options – Unusual Trading Activity – October 4, 2013

| October 4, 2013 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in US Airways (LCC) and Materials Select Sector SPDR (XLB).

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:

US Airways (LCC)

One strategist believes LCC’s impressive run might finally be at an end.

LCC is currently trading for $20.48 per share and is up 52% for the year. The share price is 86% above the 52-week low of $11.01 and just reached a new 52-week high as of this writing.

The trader bought 3,500 January 20 puts for $2.06 while selling the same amount of November 21 calls for $0.70. The total cost of the trade, typically called a collar, is $1.36 per spread.

A collar is often used to protect gains from a long stock position. The trade typically utilizes calls and puts in the same expiration, so this mixed month collar is somewhat unusual and could suggest a more complex strategy.

Materials Select Sector SPDR (XLB)

A big trade this week suggests the basic materials sector is going to hold its ground.

XLB, a popular materials sector ETF, is currently trading for $41.94. The shares are up 25% from the 52-week low of $33.57 and are 4% below the 52-week high of $43.56.

This week, a trader sold 9,500 October 41 puts for $0.24. The strategy suggests XLB won’t fall below roughly $41 by October expiration.

XLB is less than a $1 away from the trader’s short strike, so he or she must be confident the materials sector isn’t in much danger to drop substantially from current levels. There also appears to be significant technical support at the $41 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


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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.