Travelers Options (TRV): Unusual Trading Activity

| September 17, 2012 | 0 Comments

TRV OptionsOptions in big-cap insurance company Travelers (TRV) lit up our tracking system all last week with a large amount of unusual trading activity. 

And Friday was no different. 

TRV call options are on the move.

Travelers has traded in a tight range since the beginning of the year… moving only between $58 and $60 a share.  But now it has broken out of its range and is heading higher. 

And option traders are betting it will keep climbing. 

In today’s market, Travelers is holding up well, currently down only $0.06 to $68.52. 

Like kids in a candy store, option traders bought a heavy amount of call options on Friday.

They especially had their eyes on the TRV January 2013 $70 strike call options for a mere $1.70 per share.  And with the stock trading only two points out of the money with four months to go, this is a high probability bet.

On Friday afternoon, we saw a single block trade of 1,200 contracts… well above the normal volume.

And while the trade is a mere $20,400 bet, it has big profit possibilities.

By buying these calls naked (without any corresponding stock or other options), traders have unlimited upside potential.  They stand to cash in nicely if TRV trades above $71.70 by January expiration.

What’s more, when we see heavy call buying spread across not just this strike but many strikes, it usually indicates positive sentiment.

In other words, it shows that multiple traders have the same feeling about the stock’s potential to rise.

Now, if you don’t already know, Travelers provides various commercial and personal property and casualty insurance products and services to businesses, government entities, associations, and individuals.

As I said before, TRV has been trading in a tight range for a long time.  So, what’s causing this sudden burst in option activity? 

Since there haven’t been many news headlines or press releases on the stock lately, I think it’s the company’s general business model that is fascinating traders.

Travelers fared well through the financial crisis, and its relative strength has helped it outperform many of its peers.

In addition, Travelers’ newly formed direct-to-consumer initiative may boost growth in the future.

Finally, analysts are looking ahead this year.  They believe that premium growth should accelerate if the economic recovery continues to gain traction.

Their forecast is for modestly higher premiums in coming periods.  And an increase in demand for commercial insurance products will show right on top line revenue.

Bottom line…

It’s obvious a number of option traders think Travelers has broken out of its stagnant range and is poised for more upside.  We’ll wait and see if they’re correct.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.