Unusual Options Activity: RAD, RIG, TWTR, TXN, And More

unusual options activityIt’s Sunday night so 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 (or who is making them), I believe that it’s important to be aware of notable options activity as another 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

WisdomTree Europe Hedged Equity Fund (HEDJ) – Another 5,500+ Feb $65 calls were purchased for $3.60-$3.70, against open interest of 61,124 contracts (now 66,174 contracts). Since June 29th there has been sizable buying in these calls. HEDJ bounced off of the 200-day simple moving average two weeks ago and is now setting for a return to the $67-$68 level.

Rite Aid (RAD) – There was a rollout from 100,000+ July 17 $9 calls ($0.06-$0.07 credit) into 50,000 Oct $9 calls ($0.66 debit). Rite Aid (RAD) is close to retesting the multi-month resistance level at $9. Earlier this year they acquired EnvisionRx for $2B in cash and stock, giving them an entry into the pharmacy benefit manager side of the business. On June 11th, Credit Suisse initiated RAD with an outperform rating and a $10 price target citing not only organic growth potential, but sees more M&A in the coming years.

 

Tuesday

Twitter (TWTR) – Another 5,719 Jan 2017 $35 calls were bought for $8.85, against open interest of 39,710 contracts. Roughly 40,000 of these TWTR calls have been bought since June 30th. Twitter’s earnings are due out on July 28th.

Texas Instruments (TXN) – There was a rollout from 7,070 July 31 weekly $49 puts ($0.98 credit) into 7,070 July 31 weekly $50 puts ($1.58 debit). On July 7th, there was a rollout from 2,500 July 17 $55 puts ($4.10-$4.15 credit) into 4,000 Aug 21 $50 puts ($1.60 debit). Texas Instruments earnings are due out on July 22nd (shares of TXN have dropped on 3 out of the last 4 reports). Traders are likely taking these bearish bets (or hedges) after weak guidance from AMD and Samsung prior to Q2 earnings season kicked off.

 

Wednesday

NewLink Genetics (NLNK) – There was a rollout from 1,953 Aug $40 calls ($13.70 credit) into 1,953 Aug $45 calls ($9.50 debit). The Aug $40 calls were bought for $7.00 on July 10th. Shares broke out above $48 on July 13th (resistance now at $57-$58) just one day ahead of their Investor Day. The biotech raised their price target raised to $62 from $50 by Mizuho on July 15th.

 

Thursday

Chicago Bridge & Iron (CBI) – Roughly another 7,000 Aug 21 $45 puts were purchased for $2.70-$2.75, against open interest of 20,232 contracts. Nearly 20,000 of these were bought on July 13th and 14th. Q2 earnings are due out on July 23rd.

 

Friday

Chesapeake Energy (CHK) – 10,000 Oct $10 puts were purchased for $1.13, against open interest of 14,611 contracts. Chesapeake is projected to lose $0.21 and $0.19 in EPS this year and next year, respectively. On July 13th, Barclays reiterated their sell rating on CHK and lowered their price target to $7 from $10.

Energy XXI (EXXI) – There was a rollout from 10,000 July 17 $3 puts ($1.10 credit) into 10,000 Aug 21 $2.50 puts ($0.85 debit). If oil prices stay low (relative to early 2014) this could be a potential bankruptcy candidate. Losses are likely to $3.00-$4.00 per share range annually over the next couple of years (estimates continue to fall). Shares broke through the $2.30 support level two weeks ago.

Kansas City Southern (KSU) – There was a rollout from 4,000+ Aug 21 $95 calls ($4.00-$4.70 credit) into 4,000+ Aug 21 $100 calls ($1.90-$2.05 debit). The Aug 21 $95 calls were initially bought for $2.50 on July 14th. As expected energy revenue for the second quarter hurt the overall performance, but they did beat EPS estimates on Friday morning.

Transocean (RIG) – The Nov $9/$13 bear put spread was put on another 5,850 times for a $1.28 debit. This was done roughly 50,000 times from July 10th through July 16th on RIG. ConocoPhillips (COP) is reportedly cutting capital expenditures for deepwater exploration, so this could spiral towards others in the sector doing so (and this could negatively impact drillers like RIG).

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.

 

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