MTG, FL Options – Unusual Trading Activity – October 6, 2014
This week we’re taking a look at unusual options trading activity in MGIC Investment (MTG) and Foot Locker (FL).
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:
MGIC Investment (MTG)
At least one trader is gambling on big downside in private mortgage insurer, MGIC.
MTG is currently trading for $7.89. The price is 19% above the 52-week low of $6.62 and is 17% below the 52-week high of $9.50.
A trader bought 4,500 November 6 puts for just $0.10 per contract. With the stock trading at nearly $8, the share price would need to drop significantly for these puts to be worth anything by November expiration.
Put purchases like this are a pure downside gamble. You don’t spend just 10 cents on an option unless you’re going for a home run (a very low odds home run).
Foot Locker (FL)
Foot Locker is off its highs, but some traders could be looking for another run higher.
FL is trading for $55.98, up a solid 37% so far this year. The shares are just 4% below the 52-week high of $58.40 and 77% above the 52-week low of $31.62.
A bullish spread traded today in FL, with the purchase of 2,000 November 57.50 calls and the sale of 2,000 November 62.50 calls. The vertical bull call spread cost a total of $1.17 per spread.
The short options in this case only cost $0.28. But, when trading a spread 2,000 times, the savings can really add up. That’s the benefit of using the spread strategy.
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
