The Charles Schwab Corporation, through its subsidiaries, provides securities brokerage, banking, money management, and financial advisory services. The company operates through two segments, Investor Services and Advisor Services. SCHW is currently trading around $27.67 in a 52 week range of $20.44-$29.13. The company’s stock has been outperforming the market this year with shares rising 6.5% year to date. Options traders seem to think that this trend will reverse as order flow in SCHW has been decidedly bullish during today’s trading session. Today a trader bought over 6000ish SCHW August 28 Calls for $.25. This is an extremely bullish order and involves this trader laying out $150,000 in total premium. The stock looks strong today with rumors that Goldman Sachs might be interested in purchasing them.
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 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long.
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.
Buying SCHW August 28 Calls for $.30
Risk: $30 per 1 lot
Targets: Sell 25% at $.35, Sell 25% at $.40, Sell 25% at $.50, Sell 25% at $.60
Greeks of this Trade:
(Full disclosure: I long SCHW Calls)