SDRL, JD Options – Unusual Trading Activity – December 15, 2014
This week we’re taking a look at unusual options trading activity in SeaDrill Limited (SDRL) and JD.com (JD).
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:
SeaDrill Limited (SDRL)
At least one trader believes SDRL could be range bound through January 2016.
SDRL is currently trading for $11.03, down 71% year-to-date. The price is just 2% above the 52-week low of $10.85 and is 72% below the 52-week high of $39.36.
Today, a trader sold the January 2016 18 calls and the January 2016 8 puts, each 5,000 times. The calls sold for $1.05, while the puts traded for $1.45. The trade is maximized if SDRL remains in the $8-$18 range through January of 2016.
Does the trader really believe the offshore driller is going to remain in a $10 range for a year? It’s certainly a possibility. On the other hand, the trader could be looking to get long at $8, or cash out of a long position at $18, and is using options to set entry/exit points. Or, it could be a volatility trade, with the seller trying to capture increased volatility in the options.
JD.com (JD)
Chinese online retailer JD.com is seeing some heavy options action today.
JD is trading for $23.40. The shares are 29% below the 52-week high of $33.10 and 17% above the 52-week low of $19.94.
This morning, a trader sold 5,000 March 27 calls for $1.40. Open interest was only around 100 for the strike previously, so this was definitely opening.
There’s an excellent chance this is a covered call trade. The trade will be maximized if JD closes at $27 on March expiration. But, the covered call also provides some downside protection against long stock holdings and additional gains for the stock owner if the price upside is limited.
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
