Today in unusual options trading activity: Large bearish spread in DG, bullish flow in SPLS and upside calls in RFMD.

 

DG logoLarge Bearish Spread in Dollar General

DG trading 64.55, which updated its bid for rival Family Dollar over the weekend, saw a customer execute a large bearish 1 by 2 put spread this morning.? The trader bought 5,000 of the Sep 64 puts paying 1.25. Against the put purchase he or she sold 10,000 of the Sep 62 puts at .50.? The net 1 by 2 was a debit of .25.

This trade will perform well if DG eases lower over the next few weeks.? The trader would reach peak profit at a price at 62 dollars a share.? His downside break even is 60.25 which would be a serious break lower for DG in the next couple of weeks.? It also loses if DG makes a quick move higher. ?

In general stability or easing lower with IV dropping is the best case scenario.? This trade should be considered mildly bearish DG and bearish IV

 

staples logoBullish Flow in Staples Inc.

SPLS trading 12.43 saw bullish option flow this morning.? A customer executed a market sweep of the Jan 2015 14 calls.? The trader simultaneously bought about 8500 of the Jan 14 calls paying .25.? With the move the stock has recently made jumping from the 10?s to the 12?s this is likely an outright call purchase with the trader looking to ride momentum.

The trade will do well if staples makes anything but a crawl higher from 12.5 to 14 over the next 3 plus months.? Expiration break even would be anywhere above 14.25, however it he stock makes a quick move and IV keeps jumping, this trade could profit much quicker.
With SPLS vol up 2.75% today this trade points toward continued bullishness in both the stock price and option volatility.

 

?RF Micro.D logo

Upside Calls In RFMD

RFMD trading 12.57 with an Ol of 41.5.? A trader bought 10,00 upside calls in October.? The trader bought 10,000 of the October 14 calls paying .25 on 2000 and .30 on 8,000 in one print.? Like SPLS, RFMD has had a nice pop over the last couple of days.

Based on the size and duration of the call purchase, this is almost certainly bullish. The trader is betting that RFMD will be above 14.25 by October expiration. This trade should be viewed as bullish both the underlying and RFMD IV (which is rallying today).
Traders looking to piggy back could consider the 13/14 call spread for .25