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Unusual Options Activity on SU, SKS, IGT, and DE

Spread strategists took aim at IGT and DE, while premium sellers swarmed SU and SKS

by 11/29/2011 9:24 AM
Stocks quoted in this article:

Among the equities attracting options speculators on Monday were casino concern International Game Technology (IGT - 16.54), farming equipment firm Deere & Company (DE - 76.50), commodities issue Suncor Energy Inc. (SU - 27.98), and retailer Saks Inc. (SKS - 8.91). Here's a quick roundup of some of the most popular options trades of the day:

  • First up, it appears one speculator may be betting on IGT to remain range-bound over the next year or so. Specifically, symmetrical blocks of January 2013 15-strike puts and 20-strike calls changed hands -- both closer to the bid price, suggesting they were sold. As such, it looks like the trader constructed a short strangle on IGT for a net credit of $4.05 per pair of contracts. By doing so, the investor can pocket at least a portion of that premium as long as IGT finishes between the $10.95 level (put strike minus net credit) and the $24.95 level (call strike plus net credit) when the LEAPS expire.
  • Meanwhile, DE was also targeted for a spread yesterday. Jumping right in, the trader bought several hundred December 62.50 puts for 14 cents apiece, and simultaneously sold an equal amount of December 65 puts for 21 cents each. Or, simply put, the speculator initiated a bull put spread on DE for a net credit of 7 cents per pair of options. In order to retain that net premium, the trader needs DE to remain north of $65 through the next few weeks.
  • Elsewhere, SU followed crude oil futures higher yesterday, and it seems a handful of options players are betting on short-term support for the stock. By the closing bell, the equity had seen more than 14,300 December 26 puts cross the tape -- 97% of which traded at the bid price, implying they were sold. Plus, put open interest at the front-month strike skyrocketed overnight, pointing to an influx of new positions. By writing the puts to open, the sellers are hoping SU stays north of $26 through December options expiration, keeping the 26-strike puts out of the money.
  • Finally, premium sellers also swarmed SKS -- though to bet on short-term resistance. Specifically, the security's out-of-the-money December 13 call saw almost 1,100 contracts cross the tape on open interest of fewer than 200, signaling a flood of fresh initiations. However, most of the calls traded at the bid price -- again, hinting at seller-driven volume. By writing the calls to open, the sellers are hoping SKS remains south of the $13 level through front-month options expiration. In this best-case scenario, the calls will expire worthless, and the sellers can retain the entire premium received from the sale.


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