T-Mobile US, Inc. provides mobile communications services under the T-Mobile, MetroPCS, and GoSmart brands in the United States, Puerto Rico, and the U.S. Virgin Islands. It offers postpaid and prepaid wireless voice, messaging and data services, and wholesale wireless services. TMUS is currently trading around $28.50 in a 52 week range of $24.90 – 35.50. The company’s stock has been underperforming the market this year with shares decreasing 15.21% year to date. Today, a trader sold 16700 TMUS Oct14 27.0 Puts at $0.28. This order involves this trader collecting just over $460,000 in total premium credit. This position could be a hedge on short stock, or bullish speculation on the upside. TMUS trades an average 1.4 million shares day, and this order controls 1.6 million shares. This indicates a very strong support level at $26.72, since any close lower than the 27 strike will force this trader to buy stock. TMUS is trading below the Ichimoku Cloud, indicating that price momentum could be pushing the stock lower, however, put selling is one of the strongest bullish indicators of Unusual Option Activity.
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/1usQnKR or through the only Unique Unusual Options Activity Scanner: http://bit.ly/1sCSaws
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 Trade:
Selling the TMUS Oct14 27.0 Puts at $0.28
Risk: Stock going to $0
Greeks of this Trade:
Delta: Long
Gamma: Short
Theta: Long
Vega: Short