More unusual options trading activity: Large diagonal put spread in NRF, bearish put action in VALE, and the closing of a massive open position in PBR.
Large Diagonal Put Spread In Northstar Realty Finance Corp
NRF is currently trading around $18.80, although it typically only “trades by appointment.” We saw a large diagonal put spread go up in this relatively illiquid name today. A trader bought 17,00 of the Dec 18 puts for $.80 and then sold the Sep 16 puts for $.10. Both transactions appear to be opening trades.
This is likely a hedge of some type with the sep puts being sold to finance the Dec 18 put purchase.? This is a stock that hardly ever trades, thus this investor likely has an ax to grind.? And since this is probably a hedge, I would view it at slightly bearish the stock, but 100% bullish volatility between now and December.
Bearish Put Action in VALE SA
VALE trading 12.93 is seeing bearish put action on December.? Traders have bought over 7000 of the Dec 12 and 11 puts each.? Traders paid .56 just over 7,000 times and .26 and .27 a contract on over 7,000 of the dec 11 puts.
If the trader was just buying the 12s, I might consider these to be a hedge. However, the price action on the 11 strike as well as the 12s should be disturbing to VALE longs.? Typically put stripe purchases are less a hedge and more a play on underlying weakness
These put purchases should be viewed as bearish the underlying and bullish IV in VALE.
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Closing Of A Massive Open Position in Petro Bras
PBR trading 19.70. A trader likely closed a massive open position in Jan 2015 calls. On August 19th, a trader bought? 47,000 of the Jan 19 calls as part of a close and roll.? The trader had been long the jan 15 calls and closed those for a winner then he or she rolled higher to the 19 strike paying 1.35 a contract
Today the trader is closing his or her open position on the Jan 2015 19 calls selling over 47,000 at a price of 2.44 a contract.? This is the second time that the size up trader has closed a long call position for a large winner. It is telling that unlike the last time, the trader is not executing a roll but is instead sitting on the side lines.? This could mean that the trader thinks PBR?s run is coming to an end.
It almost never pays to bet against a trader of that size that has been right twice, clearly a smart customer.? I would view this trade as bearish the stock and bearish PBR vol.? I would be keeping my eyes open for a large block of 45-50k contracts in the 4-6 month time frame to see what this customer might do next.