Unusual Options Activity In The Blackstone Group $BX
Unusual Options Activity In The Blackstone Group $BX
As many of you know, unusual options activity 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…
The Blackstone Group $BX is a massive, publicly owned investment manager. The company has a market cap near $50 billion and earns about $2 billion a year in profits. Follow the link for more info on the company.
$BX is up 30% so far for the year. The current share price of $42.60 is just 1% from the 52-week high and 70% above the 52-week low.
So what does unusual options activity in $BX tell us?
Blackstone recently made news by purchasing a large chunk of real estate holdings from GE Capital. The company also just raised $17 billion for another global buyout fund. The well-respected firm doesn’t seem to have any trouble raising capital in a hurry.
Here’s the deal…
A trader purchased 16,000 September 39 puts for $1.33 while simultaneously selling the same amount of September 30 puts for $0.15. The total cost of the trade was $1.18 per spread, or around $1.9 million overall. Remember, any time there’s a cash outlay on a spread, it’s considered a debit spread.
The cost of the trade is also the max loss on the trade. The trade breaks even at $37.82 and max gain is at $30. The total max profit on the trade is $12.5 million.
There are a couple interesting things about this trade. First off, the short put strike (30) only costs $0.15. Why bother capping profits for only $0.15? On one hand, 15 cents times 16,000 contracts is still a quarter of a million dollars. Moreover, if the trader doesn’t believe $BX has any chance to drop below $30, then why not save some money on premiums?
What’s more, the fundamentals on Blackstone actually look quite good. That leads me to believe this spread is likely a hedge against a long position rather than a speculative bet.
Here’s the chart of $BX:
As you can see from the chart, $BX has been on quite the tear this year. The stock has been trading above the 50-day moving average since last November. The share price is also right at the 52-week high.
The put spread buyer is likely hedging against an unexpected drop below the 50-day moving average support line. Based on the chart (and the fundamentals), it doesn’t seem like $BX is going to be trading at $30 anytime soon.
More Options Trading Ideas…
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!
Yours in Profit,
Gordon Lewis
Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com. You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.
Category: Unusual Options Trading Activity
