Community Health Systems, Inc. (CYH) is an operator of healthcare facilities in the U.S. The company’s stock is currently trading around $35.45 in a 52 week range of $35.36-$51.29. The stock has been massively underperforming the market and has made new 52 week lows during today’s trading session. As the stock makes new lows we are seeing large put buyers in CYH.  Earlier in the session a trader bought 6,652 CYH May 39 puts for $4.66. Now a total of 10,000 contracts have traded on that line and today’s volume will create the largest line of open interest in any contract in May expiration. These are extremely bearish bets that indicate the high level of bearish conviction this trader has in CYH. The stock is trading well below the Ichimoku Cloud and the future cloud is sharply downward sloping. With a weak chart and bearish order flow we believe that CYH is signaling for a short position.

Trade: Buying the CYH Apr 34 Puts for $0.95
Risk: $95 per 1 lot
Breakeven: $33.05

Diamond Offshore Drilling, Inc (DO) is an oil and gas drilling contractor that operates offshore rigs. The company’s stock is currently trading around $44.00 in a 52 week range of $43.95-$73.19. The stock has been massively underperforming the market this year with shares falling nearly 22% year to date. Options action during today’s session suggests that traders believe this trend will continue through the rest of the year. Earlier in today’s trading session a trader bought 1,652 DO Jan 2015 36.25 puts for $1.61. In addition to this large put order in DO we have also seen massive put buying in Transocean Ltd. (RIG) which operates in the same sector as DO. With shares if DO hitting fresh 52 week lows in today’s session we believe the chart is indicating lower prices. With a bearish chart we believe that this order flow signals for a short opportunity in DO.

Trade: Buying the DO Jan 2015 36.25 for $1.70
Risk: $170 per 1 lot
Breakeven: $34.55

NextEra Energy, Inc. generates, transmits, distributes, and sells electric energy in the United States and Canada. The company produces electricity from gas, oil, solar, coal, petroleum coke, and nuclear sources and this sector has performed extremely well as of late.

Today we saw a trader buy 4,434 NEE June 100 Calls for $0.55.  This gives this options buyer the right, but not obligation, to buy 443,400 Shares of stock for $100 between now and June expiration.   This trader paid almost $250,000 for this right.

Since this order hit the tape the stock has been on fire and the calls have moved from $0.55 to $0.80, meaning the trader has paper gains of nearly $150,000.  I personally chose not to take this trade due to high open interest (already 12,000 prior to the order), but the NEE chart looks great and I believe it will continue to head higher.

Andrew Keene

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells across the world.  Looking at the chart and using the Ichimoku Cloud, every single matrix leads me to believe this stock is headed lower.  It is trading below the Ichimoku Cloud, it is under the 9- and 26-day moving averages, and previous performance is weak (the stock hit a new 52-week low today).

Combined with the above bearish arguments, today we saw a trader come in and buy over 12,000 RIG May 37 Puts for $0.70.  I think this is smart money and decided to follow, paying up slightly ($0.77) in the same line and currently close to getting filled at my first price target of $0.90.

Let’s break down my trade:

The Trade: I bought the RIG May 37 Puts for $0.77
Risk: $77 per 1 lot
Targets: $0.90, $1.10, $1.30 and $1.50

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

Air Products and Chemicals, Inc (APD) is a commodity chemicals company providing product and services to businesses in many different industries. The company’s stock is currently trading around $119.95 in a 52 week range of $84.04-$123.60. The stock has been doing well this year with shares rallying over 7% year to date. Options action in today’s trading session suggests that traders believe this trend will continue through the rest of the year. Earlier in the session a trader bought 9,000 APD Jan 2015 135 calls for $3.90. This is a very bullish trade and represents some very unusual volume in APD. Over 5.5 times the average daily option volume has already traded in APD. This is also an outlay of  nearly $3.7 million for this trader.  With shares trading well above the cloud we believe that APD should head higher through January expiration.

Trade: Buying the APD Jan 2015 135 Calls for $4.10
Risk: $410 per 1 lot
Reward: Unlimited
Breakeven: $139.10

Air Products and Chemicals, Inc. (NYSE: APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company operates through four segments: Merchant Gases, Tonnage Gases, Electronics and Performance Materials, and Equipment and Energy.  Today a trader bought 10,000 APD Jan 2015 Calls for $4.10.  Let’s breakdown this trade:  this is a $4.1 Million bet APD can trade up to $135 by the end of 2015 with a break-even of $139.10.  Anytime I see an order this large, I need to allocate some of my capital to this trade, so I just followed the trader into the same position:

The Trade: I bought the APD Jan 2015 135 Calls for $4.10
Risk: $410 per 1 lot
Reward: Unlimited
Break-even on Expiration: $139.10

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

Stillwater Mining Company (SWC) engages in developing, extracting, processing, smelting, refining, and marketing palladium, platinum. It also explores for all different types of metals such as: nickel, copper, gold, and silver ores. We have seen very bullish call buyers over the last 2 weeks in SWC and I think the stock is headed higher.  When I am trading using the Ichimoku Cloud there are always several different ways I can set up my entries and exits.

Aggressive Long Set-Up: Buy Stock at $14.98 with a $14.14 Stop
Target #1: $15.39
Target #2: $15.98
Target #3: $16.49

Aggressive Pull-Back Trader Buy Stock at $14.24 with a $13.24 Stop
Target #1: $14.74
Target #2: $15.24
Target #3: $15.74

Mild Pull-back Buyer: $13.24 with a $12.50 Stop
Target #1: $13.54
Target #2: $14.04
Target #3: $14.54

Allergan, Inc. (AGN) operates as a multi-specialty health care company primarily in the United States, Europe, Latin America, and the Asia Pacific. This stock has been on fire recently and is breaking through its 52 Week highs. Today we saw a very interesting trade where a trader bought 1,000 AGN July 140 calls for $5.84 and then sold 1,000 July 115 puts to reduce the cost of the trade. This is known as a “risk reversal.”  A trader will get long 100,000 shares at two different levels: $115 and $140. This trader has a breakeven at $142, but let’s break this down a little further.

The Trade: Trader bought 1,000 AGN July 140 Calls and Sold July 115 Puts for $2.00 debit
Their Risk: $117,000
Their Reward: Unlimited
Breakeven: $142

Between $115-$140: Trader will lose Cash outlay of $200,000

Under $115 and Above $140, Trader will become Long 100,000 Shares of Stock

PACCAR Inc (PCAR) is a company that manufactures medium and heavy duty trucks under several different nameplates. The company’s stock is currently trading around $65.95 in a 52 week range of $47.12-$66.46. The stock has been outperforming the market this year with shares gaining over 11% year to date. Options activity during today’s session would suggest that traders believe this trend will continue through May expiration. Earlier in the session a trader bought 5,000 PCAR May 66.60 calls for $2.05 to $2.10. This is a very bullish trade that requires this trader to invest around $1 million in premium. PCAR is also trading above the Ichimoku Cloud, suggesting the stock has more room to the upside. With order flow this strong and a bullish chart set up we believe PCAR is setting up well for a long.

Trade Setup: Buying the PCAR May 66.6 Calls for $2.10
Risk: $210 per 1 lot
Reward: Unlimited
Breakeven: $68.70