PACCAR Inc (PCAR) is engaged in the design, manufacture and customer support of light, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. The company also provides customized financial services, information technology and truck parts related to its principal business. PCAR is currently trading around $58.55 in a 52 week range of $53.59 – 68.81. The company’s stock has been underperforming the market this year with shares decreasing .88% year to date.
Today, a trader bought 1000 PCAR Feb15 67.5 Calls for $0.55. This order involves laying out $55,000 in total premium. The stock is looking pretty strong today, in a market that is trading lower. We have seen 2x the average daily volume in PCAR today, and this order represents a larger than average trade size in the name. The stock is trading below the Ichimoku cloud, indicating that this might not be an appropriate setup for beginners. However, with the stock performing strong in the last few days, it seems like this trader is looking to capture a move to the upside.
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 the only Unique Unusual Options Activity Scanner: http://bit.ly/1sCSaws
Order flow can however at times be deceiving. 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. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.
The Trade:
Buying the 1000 PCAR Feb15 67.5 Calls for $0.55
Risk: $55 for every 1 lot
Greeks of these Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
Full Disclosure: I am currently in this trade
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