Skip to content
August 29, 2012 / redman59

Is the Macho Man Trading from the Grave?

Sorry, he’s probably not but I could not think of a snappy title with putting ConAgra in there.  On a more serious note, today while searching free sites for option order flow I came across bullish put flow in $CAG.  I thought this was interesting given my post last night about hurricanes and industries/stocks that could benefit.  While this would be highly speculative it raised a point at the end of my post in how traders can look at option order flow for institutional positioning to further quantify a trade.  Today I came across this information, free courtesy of WhatsTrading:

CAG
– Bullish flow detected in ConAgra Foods Inc with 7207 calls trading, or 13x the recent avg daily call volume in the name. Shares near $25.185 (0.155) with ATMIV lifting by 1.36 point and 99% of todays call premium trading offer side. (Auto Content (Trade-Alert))

So with this information I then went to my thinkorswim desktop application and opened up the CAG options chain with Time and Sales (newer feature free to clients).  Below are the screen shots:

  • First shows the September and December option chains as this is where most of the activity took place.  Note the volume comparing to open interest in the September 26 calls (2085 / 1734) and the December 25 calls (5082/1378).  I consider this as unusual option activity (click on picture to enlarge).

  • Next I went to the Time and Sales focusing on the December options chain (the larger transaction) to see if these options were bought or sold and if done in sizeable blocks (characteristic of institutions). 
  • We can see that a sizeable block of 4745 Dec 25 calls trading at 0.85c on the ask (buying to open).  Also going to the 1min chart of CAG I did not see any share volume that could have signaled this transaction as tied to stock. 
  • Also note the rise in implied volatility (IV) throughout the day as it was at 12.28% before the 4745 block traded and then raised to 13.11% and as high as 14.36% during the day, showing demand for the option (click on picture to enlarge). 

To save space I am not going to show the September chain but it was mostly bought on the ask at 0.10c.  These transactions occurred approximately 30 minutes for the 4745 Dec 25 block trade. 

Next is a daily chart of CAG and we can see that this stock has picked up momentum in the last 3 days and broke out of consolidation around its 50 day SMA.  I do not have current access to my charting platform but note the following from top to bottom:

  • RSI above 50 and making higher highs and higher lows
  • Broke out from consolidation around the 50sma and highest volume since the beginning of August
  • Williams %R (30-setting) in uptrend and above -20 (bullish)
  • Rising +DI > declining -DI and ADX turning up

Am I saying that this option activity is due to Hurricane Isaac?  Absolutely not, I just thought it was interesting as it belongs to the consumer goods industry (making Chef Boyardee, Healthy Choice, Slim Jim, etc.).  I wanted to raise awareness as this is the type of activity you could look for in those insurers or airlines as noted in my previous blog post.  Also this applies to other stocks where there is news pending or there is an unknown event and an insider is positioning. 

In the case of CAG this activity could have been related several factors such as those listed but do know as of today that the big money is betting on further upside.  Today the December 25 call transaction was at 0.85c so the big money is betting that CAG is higher than 25.85 by expiration Friday in December.  In my opinion, I would rather wait for a pullback and then jump on board and then going forward watch to see if those calls are scaled out of or if there is another option trade of size changing the directional bias of the trade. 

All of this information was obtained free of charge and there are other sites out there than monitor option volume vs. average option volume.  The only item not obtained for free was the data from thinkorswim which is provided for free to its customers.  Also while I was typing this out tonight a recommended Twitter follow @OptionsHawk came out with a blog piece titled “Methods To My Madness – Trading Options Flow” highlighting how he watches/interprets order flow in the options market.  This is probably the best free information I have come across for analyzing/interpreting options order flow with other informative content. 

***Disclaimer: I do not receive discounts, gratuities, or compensation for mention of sites listed within this blog post.  I list them as I use their information as a resource and consider them educational and beneficial to the trader.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: