XOP, DOW Options – Unusual Trading Activity – May 28, 2014

| May 28, 2014 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and Dow Chemical (DOW).

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:

SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

One trader is expecting XOP to retreat from near its 52-week highs.

XOP, a popular E&P ETF, is currently trading for $76.06. The share price is 37% above the 52-week low of $55.71 and is just 3% below the 52-week high of $78.68.

This week, a large put spread traded in XOP options expiring in July. The July 73 puts were purchased while the July 66 strike was sold. The trade cost a total of $1.30 per spread and it traded 20,000 times.

In this case, the trader reaches maximum profit if XOP closes at $66 or below on July expiration. Max gain is the distance between the strikes ($7) minus the premium cost ($1.30) for a total gain potential of $5.70 per spread.

Dow Chemical (DOW)

At least one trader believes Dow Chemical is going to keep climbing over the long-term.

DOW is trading at $51.56 and is up nearly 16% for the year. The shares are 68% above the 52-week low of $30.63 and are now 1% above the previous 52-week high of $51.28.

A trader purchased a vertical call spread in January 2016 options. The January 55 calls were purchased while the January 65 calls were sold. The total cost of the trade was $2.35 per spread and it was executed 10,000 times.

This strategy is clearly bullish as it makes money if DOW closes above $57.35 at January 2016 expiration. That’s well above the current price. However, the spread will make a robust $7.65 if the stock closes at $65 or higher at expiration.

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

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.