Volume Spike Investor » unusual options trading

Synthetic Shorting in P & G Stock Via Major Options Trading (PG)

247admin — Mon, 03 Nov 2008 18:20:16 +0000

It seems that someone is making a majorly aggressive bet against the near-future of Procter & Gamble (NYSE: PG) stock. Starting last week we noticed a marked increase in both PUT and CALL options in the consumer products giant in the NOV-2008 expiration month. And the trading volume continues today. This was actually the most active of options contracts.

It seems that a someone is trading these options conducting a form of arbitrage with the NOV $80 and $95 Strike Puts, and is also using the $80 and $95 Calls as the hedge.

Today alone we have seen over 30,000 of the NOV-08 $95 CALLS and over 20,000 of the NOV-08 $90 PUTS and over 30,000 of the NOV-08 $95 PUTS trade hands.

The options open interest is also massive: over 233,000 of the NOV-08 CALLS and over 316,000 of the NOV-08 $95 CALLS, over 231,000 of the NOV-08 $80 PUTS and over 316,000 of the NOV-08 $95 PUTS.

To show an example of the size of this bet, this 316,000 contacts is representative of some 31.6 million shares. As of June 30, 2008, there were only 8 holders with larger positions in this stock.

We do not know if someone is speculating that the recent CFO departure is more than meets the eye or if this defensive stock only being down under 15% from its 52-week is the reason. Either way, this has been a stunning volume trader today and last week in the current month options.

This stock trades an average of about 19 million shares per day.

Jon Ogg

November 3, 2008

Investors Buying PNC Protection? (PNC)

247admin — Wed, 20 Aug 2008 19:11:29 +0000

PNC Financial Services (NYSE: PNC) has been one of the more insulated financial services firms during teh entire financial and market meltdown. Even on a day where financial markets are growing concerned that Fannie and Freddie are going to be wiped out by the government bailout. That being said, why is it that PNC has seen 16,250 option contracts trade in the SEPT08 $60.00 PUTS trade hands? Before this the open interest was only 4,760 contracts…. We have also seen 8,188 of the SEPT08 $65.00 PUTS trade hands and the open interest there was only 4,621 contracts And shares at 3:06 PM EST are actually up 1% at $69.41.

It is very possible that this is a PUT SPREAD of some sort, but without any definitive matching up of orders or something of the like it is hard to know on a live basis. On the surface this would seem like it was a PUT SPREAD when you look at the trades. Things that make you go “Hmmmmm!!!”

JON C. OGG
August 20, 2008

Wells Fargo Seeing Increased Options Trading (WFC)

247admin — Tue, 19 Aug 2008 15:14:51 +0000

We are starting to see some increased trading activity in stock options of Wells Fargo & Company (NYSE: WFC). Most days now have financial stocks with various put and call optiosn activity, but this looks larger than most days so far for less than two hours into the trading day. Below is where you will get an idea of the volume, and recall that 10,000 contracts equals 1,000,000 shares on a fully leveraged basis.

OPTION/STRIKE        Volume    OpInt
SEPT08 $25.00 PUT    22,281   61,543
SEPT08 $26.00 PUT    1,024    13,565
SEPT08 $27.50 PUT    3,184    64,835
SEPT08 $29.00 PUT    3,592    16,363
SEPT08 $30.00 PUT    10,177 39,076

After looking at the same months calls, it seems that either another bet was made or that at least a hedging transaction was made:

OPTION/STRIKE Volume OpInt
SEPT08 $34.00 CALL 10,116 12,202

Wells Fargo shares are down over 4%at $27.56 as of 11:16 AM EST, and its 52-week trading range is $20.46 to $37.99.

Jon C. Ogg
August 19, 2008

Kraft Foods Options Volume Going Parabolic (KFT)

247admin — Thu, 31 Jul 2008 14:11:40 +0000

This week has seen a surge in trading in stock options in Kraft Foods Inc. (NYSE: KFT). The food giant has never been this active in memory. But oddly enough these transactions may be an inefficiency that exists rather than massive gambles. Take a look at the open interest as of yesterday now:

OPTION (Mo/STRIKE)             Volume    OpInt
KFT AUG08 $35.00 CALLS     32,060    366,121
KFT AUG08 $35.00 PUTS       37,010    373,031
KFT AUG08 $37.50 PUTS   20.806    23,002

You can bet there are some speculating here, but it looks like the huge trades have been put on to capture roughly $0.10 in profit per contract. We have heard several explanations for the increase in options trading, but it appears that selling straddles in a non-directional trade is the most plausible.

As a reminder, when you see an open interest in the same month of 366,000 contracts in the same month, that is representative of more than 36 million shares on a fully leveraged basis.

JON OGG
July 31, 2008

Linear Tech Large Options Straddle (LLTC)

247admin — Mon, 30 Jun 2008 15:46:54 +0000

Linear Technology Corp. (NASDAQ: LLTC) has just seen a rather large straddle position get taken. It looks like an investor has made a bet that the stock is going to either rise sharply or fall sharply by Thanksgiving. Here are the trades seen that signaled the alert, and we included the open interest before to show the level of interest hasn’t been there before this:

OPTION/STRIKE              Volume OpInt
NOV08 $32.50 CALLS    10,130    737
NOV08 $32.50 PUTS      10,000    3,755

Linear Tech rarely makes the unusual or most active list in stocks. It never does in options. More interesting than even the raw trade is the November month expiration. This could possibly be a capped option or share trade entered on behalf of an insider with a lock-up, or it could be something else entirely.

The stock itself as of 11:44 AM EST has seen a 1.3% rise today to $32.84 on only 1.7 million shares. That is well under an average daily volume of 6.1+ million shares. The 52-week trading range is $25.90 to $38.41.

This is now the largest options trade of the day.

Jon C. Ogg
June 30, 2008