RIG, AA Options – Unusual Trading Activity – September 15, 2014

| September 15, 2014 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in Transocean (RIG) and Alcoa (AA).

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:

Transocean (RIG)

Is more downside coming in RIG?

RIG is currently trading for $35.65, down 24% on the year. The price is now about a half percent below the previous 52-week low of $35.79 and is 32% below the 52-week high of $52.72.

A trader bought 5,000 January 32 puts in RIG for $1.14. The share price would need to drop another $5 or so by January expiration for this trade to make money. It’s also an opening trade based on open interest.

With the tough year RIG is having, this trade could be a bet on further downside or it could be a hedge. With the stock trading at just 7x earnings, I’m leaning towards the trade as a hedge against an existing long stock position.

Alcoa (AA)

AA has pulled back a bit after having a big year, but at least one trader believes the good times will return.

AA is trading for $16.34, up 58% year-to-date. The shares are 6% below the 52-week high of $17.36 and 111% above the 52-week low of $7.74.

Today, a large bullish call spread traded in the aluminum giant’s January options. The January 19 calls were bought while the January 21 calls were sold for a total price of $0.22. The call spread traded 10,000 contracts.

Some may wonder why a call spread was used with such cheap calls available. Why not buy straight calls instead? It’s because when a trader buys a spread 10,000 times, the 10 cents (price of the short calls in this case) makes a big difference in the cash outlay.

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.