OIS, C Options – Unusual Trading Activity – May 3, 2013
This week we’re taking a look at unusual options trading activity in Oil States International (OIS) and Citigroup (C).
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:
Oil States International (OIS)
A large trade has been detected in OIS. Based on the trade, it looks like an investor believes the stock is going to climb even higher after a recent spike in the share price.
OIS is currently trading for $91.99 per share. That’s after a 23% jump over the past week. The stock is trading almost 2% higher than the most recent 52-week high and a whopping 53% above than the 52-week low of $60.03.
The investor sold 10,000 December 115 calls and bought 5,000 each of the December 100 and 130 calls, also in December. All together the trade cost $2.35.
This type of spread trade is called a call butterfly. The trade is maximized if the stock closes at the midpoint strike, in this case $115, at December expiration. Maximum loss occurs if the stock closes outside of the fly, either above $130 or below $100. The trader can’t lose more than the $2.35 spent on the spread.
OIS doesn’t typically see this kind of action. Last month it averaged just 320 contracts per day. So, this clearly isn’t the norm for the stock.
The investor is bullish on the stock after activist firm, Jana Partners, took a large stake in the company with the intention to form a REIT.
Citigroup (C)
A large call spread traded in C options this week.
C is currently trading for $46.54. The shares are up 89% from the 52-week low of $24.59 and are 3% below the 52-week high of $47.92.
The January 2015 $65 calls were purchased for $1.47, while the $70 puts were sold for $0.88. The total cost of the vertical spread is $0.59.
The OTM call spread traded 5,000 times and will reach max gain if the stock closes above $70 upon expiration. The most that can be lost is the $0.59 cost of the spread.
Now, this type of volume isn’t necessarily unusual for a big name like Citigroup. However, the spread itself is interesting because it’s so far out time-wise and also very far out of the money.
The stock would have to close over 52% higher from the current price for max profits to be achieved. Granted, it’s over a year and a half away and who knows what could happen by then. Still, this is clearly someone looking for a long-term investment using options instead of stock to enact the 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
