On Wednesday, August 26th, OptionHacker alerted our traders about unusual option activity in ASML, a Netherlands-based semiconductor holdings company. On Tuesday, 8/26 and Friday 8/29, anonymous trader bought over 4000 Oct14 105 Calls at $0.85. Currently, those calls are trading at $1.75 bid $1.90, having reached over $2 this morning.
Last week, analysts at Stifel Nicolaus initiated coverage on shares of ASML, setting a “hold” rating on the stock. This morning, news broke that ASML has been given an “A-” credit rating by Morningstar, indicating that the company is a low default risk. They also issued a negative credit outlook for the company and gave their stock a one star rating. Shares of ASML opened at $96.12 this morning. ASML has a 52 week low of $79.66 and a 52 week high of $101.85. The stock’s 50-day moving average is $90.9 and its 200-day moving average is $88.77. The company has a market cap of $42.023 billion and a P/E ratio of 21.71.
Unusual Option Activity:
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/1usQnKR or through our Unique Unusual Options Activity Scanner: http://bit.ly/1sCSaws
Order flow can be deceiving at times. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7-step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. Using this plan, we are able to identify the most significant unusual options activity trades every day.
The Trade:
Buying the ASML Oct 105 Calls for $.90
Risk: $90 per 1 lot
Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
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