SLV, TLM Options – Unusual Trading Activity – April 26, 2013
This week we’re taking a look at unusual options trading activity in iShares Silver Fund (SLV) and Talisman Energy (TLM).
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:
iShares Silver Fund (SLV)
Large blocks of call selling have been detected in SLV. Based on the trades, it appears investors don’t believe silver is going to recover much ground from where it currently stands.
SLV is currently trading for $23.49 per share. That’s 31% off the 52-week high of $34.08 and just 7% above than the 52-week low of $21.96.
A block of 9,800 January 2015 in-the-money calls sold for $3.60. Plus, another block of 12,000 calls sold for $2.03 at the out-of-the-money 26 strike. These calls were likely sold against long shares of SLV as part of a covered call strategy.
The OTM covered call strategy is optimized if SLV closes right at $26 in January of 2015. In that case, the investor will make money on the stock and the short calls. This is a moderately bullish position.
For the ITM calls, $22 is the optimal expiration price. With an ITM covered call trade, the investor is attempting to capture time premium while gaining additional protection on the downside (compared to the more traditional OTM covered call strategy).
Talisman Energy (TLM)
A massive options trade occurred on oil driller TLM this week.
TLM is currently trading for $11.75. The shares are up 26% from the 52-week low of $9.30 and are 22% below the 52-week high of $15.04.
The October $13 calls were purchased for $0.62, while the $10 puts were simultaneously sold for $0.48. When done concurrently, this trade is called a combination, and is extremely bullish.
Here’s the interesting part…
The combination traded a whopping 20,000 times!
Option volume was roughly 11 times the usual amount, so someone clearly thinks big things are in store for TLM – possibly after May 1st earnings come out.
The total cost of the trade is $0.14, so the investor is using the combination to control a ton of TLM shares (2 million!) for mere pennies. Of course, if the stock plunges, this trade will be a huge loser. However, if you’re looking to buy 2 million shares of TLM, this is a far cheaper way of doing so without giving up the upside potential.
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
