VIX, IRDM Options – Unusual Trading Activity – March 17, 2014
This week we’re taking a look at unusual options trading activity in S&P 500 Volatility Index (VIX) and Iridium Communications (IRDM).
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:
S&P 500 Volatility Index (VIX)
A trader is betting big money that volatility isn’t going to spike by the end of tomorrow.
VIX, the so called investor fear gauge, is currently trading for $15.71. The price is currently 26% above the 52-week low of $11.69 and is 39% below the 52-week high of $21.91.
Today, someone sold a whopping 62,000 March 17/20 call spreads for $0.65. That is, the trader sold the 17 calls and bought the 20 calls while collecting the premium. The total premium would amount to over $4 million if VIX closes below 17 by the end of trading tomorrow.
Most likely, this strategy is a bet the Crimea situation won’t explode into more serious conflict by the end of tomorrow. Unlike standard equity options, VIX options expire mid-week, so this trade is basically a two-day bet against a spike in volatility.
Iridium Communications (IRDM)
At least one trader is making a very bullish bet on IRDM.
Iridium, a satellite communications company, is trading for $7.59. The shares are up 41% from the 52-week low of $5.37 and are 18% below the 52-week high of $9.22.
Over 6,000 July 10 calls were bought between $0.20 and $0.35. As such, this trade will be profitable if IRDM closes slightly above $10 per share on July expiration.
The average daily volume is just around 500, so this is very unusual option activity for this name. It’s also rare to see that kind of volume trade so far out of the money on a small cap company such as IRDM. The stock would need to climb over 30% by July expiration for these options to be profitable.
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
