Unusual Trading Activity: JNK, S Options

| October 18, 2013 | 0 Comments

This week we’re taking a look at unusual options trading activity in Barclays Capital High Yield Bond (JNK) and Sprint (S).

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:

Barclays Capital High Yield Bond (JNK)

One strategist believes the junk bond market could be set for some volatility in the coming weeks.

JNK, a popular junk bond ETF, is currently trading for $40.43 per share.  The share price is 8% above the 52-week low of $37.27 and is 2% below 52-week high of $40.90.

The trader bought 4,000 November 40 calls and puts for a total of roughly $0.95.  This type of trade is called a straddle.  The trade makes money if JNK closes either above $40.95 or below $39.05 at November expiration.

JNK is typically a non-volatile stock, so a straddle purchase is an unusual strategy to utilize.  Although, this particular straddle is cheap in absolute terms.  It will be interesting to see how this trade turns out.

Sprint (S)

A large block of puts traded this week in Sprint.

S is currently trading at $6.42.  The stock is currently 14% above its 52-week low of $5.61 and 12% below the 52-week high of $7.26.

On Monday, over 20,000 November 6 puts traded, including a block of 14,705 sold at $0.23.  Selling puts suggests traders believe Sprint will remain above $6 (or just below) through November expiration.

Another possibility is if S drops below $6, the put sellers will get assigned on the options and take ownership of the stock.  It could just be a way for traders to attempt to purchase the shares at a cheaper price.

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!

Yours in Profit,

Gordon Lewis

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Category: Options Trading

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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