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Most Active Options Update: Trinity Industries Inc (TRN)

Trinity Industries Inc shareholders may be trying to lock in unrealized gains

by 8/21/2014 10:54 AM
Stocks quoted in this article:

The 20 stocks listed in the table below are the S&P 400 MidCap Index (MID) components that have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest is Trinity Industries Inc (NYSE:TRN), which experienced an unusually heavy dose of put buying on Wednesday.

Most Active Options Table

Puts were popular on Trinity Industries Inc yesterday, with volume of 3,001 contracts representing 1.49 times the stock's single-session average. The most popular put was the September 40 strike, where 1,058 contracts crossed the tape. More than two-thirds of these puts traded at the ask price, implied volatility on the option rose 2.5 percentage points to 35.5%, and open interest at the strike increased overnight by 776 contracts -- confirming the addition of new bearish bets.

By purchasing September 40 puts, these speculators are betting on TRN to fall below this round-number level over the course of the next month. The contracts traded at a volume-weighted average price (VWAP) of $0.12, which means put buyers will be in profitable territory if TRN is trading below $39.88 (strike price minus VWAP) when September-dated options expire.

TRN is up 0.4% today to trade at $47.46, so these front-month bears are banking on a drop of more than 16%. However, with Trinity Industries Inc (NYSE:TRN) boasting a year-to-date gain of roughly 74%, it's also possible that TRN shareholders are buying short-term puts to lock in some paper profits on their long stock positions.


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