An increase in the trading of a stock's options over the normal daily volume is often a precursor of movement by the stock itself. This is especially true in advance of news items, such as earnings reports or takeovers.
If there is unusually high volume in CALLS, then we look for a spot to buy the stock; if there is unusually high volume in PUTS, then the stock may be either a potential buy or a potential (short) sale. The reason that heavy put volume may be interpreted as either bullish or bearish has to do with the fact that, if insiders are buying calls, it may force market makers to trade puts as a hedge. Thus a bullish situation could conceivably have heavy option volume in both the puts and the calls.
Below is a table that is published each morning in The Daily Volume Alerts Newsletter, where we make trading recommendations based on unusual option activity.
|
Symbol |
Average Volume |
Volume Today |
Call Volume |
Put Volume |
Stock High |
Stock Low |
Stock Close |
Stock Change |
IV+/- |
|
BAP |
219 |
1183 |
831 |
352 |
92.21 |
81.76 |
82.55 |
-19.13 |
53 |
|
BVN |
1763 |
13055 |
4738 |
8317 |
38.22 |
35.72 |
35.75 |
-6.29 |
13 |
|
EPU |
1875 |
6282 |
2988 |
3294 |
40 |
37.43 |
37.53 |
-6 |
0 |
|
SCCO |
5381 |
29276 |
12096 |
17180 |
32.27 |
30.59 |
30.78 |
-3.94 |
22 |
|
CNW |
303 |
2805 |
72 |
2733 |
36.31 |
35.63 |
35.67 |
-0.58 |
9 |
|
GPRO |
2240 |
55616 |
44264 |
11352 |
81.8 |
70.41 |
71.41 |
-10.35 |
21 |
|
HOG |
5706 |
21313 |
15544 |
5769 |
38.24 |
36.73 |
36.86 |
0.99 |
12 |
|
IPSU |
529 |
2143 |
250 |
1893 |
22.22 |
21.24 |
21.74 |
0.21 |
22 |
|
TIN |
1279 |
533 |
415 |
118 |
21.62 |
20.98 |
21.01 |
-0.68 |
11 |
|
UTHR |
5486 |
26034 |
11482 |
14552 |
60.35 |
58.37 |
59 |
-3.7 |
-44 |
|
WDC |
2786 |
12650 |
11523 |
1127 |
34.91 |
34.24 |
34.32 |
-0.64 |
7 |
Other High-Volume Situations: included some real drubbings in Peru-based copper companies, because of the result of the election in that country, for fear that the companies might be nationalized.
Harley-Davidson (HOG) – was a takeover rumor, even on a very bad day. Stock volume patterns are poor. There is support at 36-37.
Temple-Inland (TIN) – didn’t have much activity during the trading day on Monday, but after the close, TIN announced that they have received (and are rejecting) a $30.60 takeover bid from Int’l Paper (IP). After that, TIN skyrocketed to trade as high as 38 before closing near 30 in after-hours trading.
United Therapeutics (UTHR) – has been on our high implied volatility list for some time, and the options were getting extremely expensive lately. On Monday, the company announced the results of a Phase 3 drug trial. They weren’t that unusual, and the stock only traded down about 3 points. This is a extremely small reaction, considering how expensive the options were.
Western Digital (WDC) – was rumored to have canceled out of a conference, which always leads to speculation of a takeover bid. Stock volume patterns are poor. There is support at 34.
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