SBUX, VXX Options – Unusual Trading Activity – September 20, 2013
This week we’re taking a look at unusual options trading activity in Starbucks (SBUX) and iPath S&P 500 VIX Short-Term Futures ETN (VXX).
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:
Starbucks (SBUX)
Those lattes aren’t getting cheaper anytime soon. One trader believes SBUX will continue climbing to new highs through April of next year.
SBUX is currently trading for $76.35 per share. The share price is 75% above the 52-week low of $43.65 and just 2% below the 52-week high of $77.62.
A complex bullish trade occurred this week in SBUX options which involved three April legs. The April 77.50/85 call spread traded 1,500 times. And, April 67.50 puts were sold 1,500 times as well.
Selling the puts helped reduce the cost of buying the call spread, making the entire trade cost only $0.58 to put on. While opening up some downside risk, the trader stands to gain big should SBUX close at $85 or higher come April expiration.
iPath S&P 500 VIX Short-Term Futures ETN (VXX)
At least one trader is expecting short-term volatility to remain low through November.
VXX, a popular short-term volatility ETN, is currently trading for $13.58. The shares are up just 1% from the 52-week low of $13.49 and are 65% below the 52-week high of $39.12.
This week, a strategist bought 10,000 November 12 puts for $0.51 while also selling 30,000 November 11 puts for $0.19. The entire trade resulted in the strategist collecting a small premium of roughly $0.06.
The trade, called a put ratio spread, is maximized if VXX closes around $11 at November expiration. The 3x short puts at the 11 strike means the trader doesn’t believe the shares will drop below $11 – which is likely given the history of short-term volatility and the VXX’s typical trading range.
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
