It’s time to review several stocks that had unusual options activity over the last week. Although traders can never be sure why these trades take place (and who’s making them), I believe it’s important to be aware of notable options activity as an indicator for directional bias.
Here’s a weekly recap of 10 stocks that had unusual options activity and what, if any, significance these trades may have.
Unusual Options Activity: 10 Stocks With Notable Trades
Monday
Caterpillar (CAT) – There was a rollout from 4,000 Aug 21 $76 puts ($2.00 credit) into 6,000 Sep 18 $70 puts ($0.81 credit). On July 23rd, Caterpillar (CAT) missed Q2 revenue estimates and lowered their FY15 guidance. CAT trades at a P/E ratio of 17.24x (2016 estimates), price to sales ratio of 0.89x, and a price to book ratio of 2.77x.
Rackspace Hosting (RAX) – Over 7,000 Aug 21 $33 puts were purchased for $1.30-$1.60. RAX earnings report is due out on August 10th. The stock dropped $7 on the last report.
Shutterstock (SSTK) – The Nov $50/$55 bull risk reversal was put on 1,060 times for a $0.12 credit. This was done over 1,200+ times on July 23rd too. Shutterstock’s earnings are due out on August 6th. The commercial digital content marketplace is growing the top and bottom line by around 30% annually, but the stock does trade at a P/E ratio of 29.68x (2016 estimates). On July 14th, Morgan Stanley initiated SSTK with an underweight rating and $40 price target. Just two days before then Cantor Fitzgerald reiterated their buying rating and a $100 price target, so the age old debate between valuation and growth certainly is playing out here.
Tuesday
LyondellBasell Industries (LYB) – There was a rollout from 12,500 Jan 2016 $100 calls ($3.30 credit) into 12,500 Jan 2016 $95 calls ($5.30 debit). Also, the same roll occurred on Wednesday as well. They beat Q2 EPS and revenue estimates Tuesday morning, which helped the stock find support at the 200-day simple moving average.
Navient (NAVI) – Over 3,300 Oct $15 puts were purchased for $0.60-$0.65 (typically trades 58 puts per day). Navient’s earnings estimates for 2015 and 2016 continue to fall and the downtrend that started earlier this year in the stock confirms that.
NRG Energy (NRG) – Another 5,000+ Aug $22 calls were purchased for $0.80-$0.85 against open interest of 20,712 contracts. 20,000 were bought on July 24th and July 27th. NRG Energy (NRG) is due to release its earnings on August 4th.
Wednesday
Fitbit (FIT) – 6,000 Jan 2016 $31 puts were sold for $2.80 (tied to 108K shares). Fitbit’s (FIT) earnings are due out on August 5th, which will be FIT’s first report as a public company.
WisdomTree Europe Hedge Equity Fund (HEDJ) – Another 5,000 Feb 2016 $65 calls were bought for $3.10, against open interest of 66,207 contracts. Over 70,000 were bought since June 29th. The top holdings include Anheuser-Busch, Telefonica, Siemens, and Daimler. I noted call buying in HEDJ in my Unusual Options Activity post on July 19th.
Thursday
Barnes & Noble (BKS) – The Sep $24/$26/$30 bull call spread risk reversal was put on 1,840 times for a $0.55 debit. A trade like this one involves buying the Sep $26/$30 bull call spread and selling the Sep $24 puts for even smaller debit (requires margin). Harper Lee’s “Go Set A Watchman” set a one day sales record recently.
Friday
Ralph Lauren (RL) – 2,000+ Aug $125 puts were bought for $3.60. Implied volatility spiked 9.6% to 34.30. Earnings are due out on August 5th (shares dropped on the last 2 reports). Higher end retailers like Ralph Lauren (RL) have been struggling thanks to currency fluctuations and the narrowing spread between gross margins and selling, general & administrative costs, or SG&A (i.e. smaller profits).
Thanks for reading and have a great week!
Twitter: @MitchellKWarren
No position in any of the securities mentioned at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
