Somebody bought 19,199 call contracts on IAG Strike $6 today going into the non-farm payroll report tomorrow morning.
I have an odd feeling about tomorrow. I know that I am just talking my book. And I know it amounts to wishful thinking on my part.
But I was wondering this afternoon whether we might actually get a rally started tomorrow. And not just any rally but a mega rally, a rally begun with a breakaway gap! Such a breakaway gap rally of the kind that soars to weekly and monthly highs so fast that it does not allow the shorts to cover or the puts to sell without first paying dearly to get out.
Those June calls controlling nearly 2 million shares, as I recall, came with something like a 50 cents premium over the close today which means they probably paid roughly $1.4 million or so for the stake.
Whoever it is they have until June. But somebody certainly thinks IAG will finally lift off this pad sometime within the next few months.
It's somehow encouraging and somewhat reassuring that somebody really feels that bullish about IAG and is willing to put up some hard money on the line to back up the bullishness. Not just talk.
What was astonishing, and I have many decades of experience in the market, was the way the bid and ask were controlled Thursday on the June $6 call. I watched essentially all trades in this option on Thursday, as well as all this week, because until Thursday, I had previously written most of the contracts. Since Monday of this week, I was trying to buy to close my position in this strike but was unable to do so through Wednesday, in the range I wanted, because of limited liquidity. Open interest was only 802 contracts through Wednesday. Literally, thousands after thousands, after thousands, after thousands of these calls were traded on Thursday with the bid rock solid at .75 and the ask rock solid at .80. It was amazing! Most trades were in the .78 area. During the session I also saw the volume expand on the June $6 puts, but wasn't focused too much on those. My guess is it was a delta neutral trade, as someone else posited, with the June strike being selected to minimize the time decay and the difference in premiums on calls and puts a function of implied volatility, but i am not an option specialist. As an aside, I have a large position in the stock; most of the time with covered calls written against the postion. Bought "a few" shares today and had an order in for 1.5 hours to sell to open the June $6 calls at .80. Thousands were traded during that time interval, but there was no execution on my order (and it was not an aon order.) Good luck to all, you need it in the market, especially if you are swimming against the tide. This is a volatile stock and will have its bounce up when many of the longs have thrown in the towel.
Actually it could be a strangle because about 15K of Jun 6 puts were also traded. A lot depends on whether the calls/puts were bought/sold at ask/bid. Not all call buying is bullish. It could be a hedge against a short stock position. If it is a delta neutral then the short stock also has to be initiated when the call were purchased.
If the puts were sold at the bid, that would be a bullish sign that the trader is betting that IAG will close above 6 by June 2013.
Does anyone know whether these calls and puts were bought/sold at bid/ask?
Could that be like in the case with the "HEINZ"? When before buyout someone load bunch of Call contracts?
Everything is possible.. Some "Party" maybe thinking or sure (having insider info) that IAG going to be bought out and those 19200 contracts will triple in price..? Interesting..
Thanks for posting that. That is a very bullish spread to me. Could also be a fund writing that spread before they buy the actual shares to move the stock up. Options Monster will probably comment on it soon if they haven't already.