OIS, MDVN Options – Unusual Trading Activity – August 2, 2013

| August 2, 2013 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in Oil States International (OIS) and Medivation (MDVN).

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 very bullish trade hit the tape this week in oil equipment and services company, OIS.

OIS is currently trading for $94.68 per share.  The shares are up 32% year-to-date.  The current price is 49% above the 52-week low of $63.42 and 9% below the 52-week high of $104.

One trader believes OIS has quite a bit more upside.  A March 2014 spread traded in the 100/115/130 strikes.  The spread traded 8,000 by 14,000 by 7,500 contracts with the 14,000 (115 strike) being sold and the other strikes being purchased. The total price of the trade was $2.65.

This type of trade is called a fly or butterfly, although this one is slightly imbalanced to the bullish side.  Roughly speaking, the spread is maximized if OIS closes at $115 in March of next year, although the trade remains profitable approximately between $100 and $130.

Medivation (MDVN)

One strategist believes biotech company MDVN is due for a pullback from current prices.

MDVN is currently trading for $57.23.  The shares are up 37% from the 52-week low of $41.89 and are just 3% below the 52-week high of $59.24.

The trader purchased the September $50 puts for $5 and sold the September $40 puts for $1.50.  What makes the trade interesting is it was a put ratio spread.  He or she bought 1,250 of the $50 puts and sold 2,500 of the $40 puts.  That lowered the total cost of the trade to $2.

The benefit of the ratio trade is that it significantly lowers the cost of the trade.  The spread is maximized if the stock closes at $40 in September.  The ratio formation of the trade does open up risk on the downside, but the shares would have to fall pretty far before it became a big issue.

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

 

Tags: ,

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.