Trade of the Day: OKS

Despite the drop in stock price, most analysts stay bullish on the stock and cite the success of OKS’ most recent earnings report. The company reported an EPS of $0.62 which solidly beat the predicted $0.56 of other stock analysts for the quarter, and many stock experts have shifted their price target for this company to $51.00. OKS officials slightly lowered their forward guidance for operating income to $934 million though they did not change the $830 million estimate for net income. In other projects, OKS finished a $600 million Bakken natural gas pipeline operation in April which brings in an estimated 60,000 barrels per day. To increase the productivity of this pipeline by roughly 225%, OKS plans to put another $100 million into this investment. Analysts praise the company’s strategic maneuvers while trying to expand within the unforgiving NGL industry and remain optimistic on the company’s future success.  


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 http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .

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.

The “Institutional Trade”:   A trader sold 1700 OKS Sep 50 Puts for $1.425
Their Risk: $4875 per 1 lot
Their Reward: $142.50 per 1 lot
Breakeven: $48.25
Cash Received: $242,250

My Trade Buying the OKS Oct 50 Calls for $1.45
Risk: $145 per 1 lot
Reward: Unlimited
Breakeven: $51.45

Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

(Disclaimer: I do NOT have this trade on yet)