Let the Dragon “Bird-Dog” for Unusual Option Activity

Track major changes and spot potential trading opportunities with the Dragon.  Scan the market in real time for a top 50 ranking of matching stocks and their options based upon one of the following criteria:

• Stock Activity – stock volume, the stock’s options volume; P/E ratio, open interest or volatility
• Option Activity – option volume, open interest or implied volatility
• % Change – open interest, stock or option volume, put/call ratios or volatility – implied or historical
• P/E Plays – volatility plus open interest, volatility plus volume

Below you will find several examples of the type of opportunities that the Dragon can uncover.

 

CLX – With earnings from its competitors Colgate-Palmolive and Procter & Gamble out of the way, option traders staked 21 times as many bets on the price direction of household chemicals maker Clorox (reporting earnings tomorrow) than usual. Shares closed 2% lower at $53.10, but its implied volatility rose more than 45% today – more than any other option series traded– with the option market anticipating twice as much price risk to Clorox shares over the next month than they have shown historically. We haven’t seen implied volatility in Clorox at this level since last July, when it was the subject of takeover rumors in the market, so this is an interesting ticker to watch in connection with earnings. Also noteworthy is the fact that despite the imminent EPS announcement, traders have largely eschewed the front-month contract in order to sell July calls at the 55 strike for $1.75.

 

VLO- Billionaire oil trader Boone Pickens’ prediction today that oil prices could hit $150 this year provided the opening salvo in a new round of speculative fire in the options market. The news added an extra pinch to the post-earnings decline for shares for North America’s largest refiner, Valero, down 4.5% to $49.15 today. Much of the 85,000-strong volume in its options was tied up in out-of-the-money call spread activity in the June contract, with a trader buying the $55 calls for 90 cents against the sale of the 60 calls for 34 cents apiece in a debit spread indicating a reasonably strong recovery heading into the summer.

 

V- A 3% gain for its shares to $83.40 appears to have re-whetted the speculative appetites of call traders in Visa. With some 188,000 options trading today, 4 times as many calls are trading as puts, and these at the out-of-the-money strikes we observed prior to its earnings announcement earlier this week. Two-way traffic is occurring at strikes of 85 and 90, while the 95 call strike attracted plenty of buyers at $1.05. Can Visa hit $100 in May? Traders have bet on that possibility more than 3,700 times today even though the 20-cent price of that position reflects just a 6% probability of it actually coming true.