Industrial strength options
- MSM call volume nearly 19 times put volume
- Large trade: 6,625-contract position in OTM call
- Earnings scheduled for October 24
MSC Industrial Direct (MSM) shares snapped a seven-day losing streak on Wednesday, but many traders may not have even noticed if it hadn’t been for what was happening in its options.
MSM was at the top of Wednesday’s LiveAction scan with a call-put ratio of nearly 1900 to 1—twice as high as the next stock on the list:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Two notable trades Wednesday morning put MSM over the top. Normally, the 3,700-contract position in the October $90 calls—representing more than 60% of MSM’s average daily stock volume of roughly 600,000 shares—would have jumped off the trading screen.
Yesterday, not so much. First, the contract had open interest (OI) of 4,300 contracts, which means traders could have been getting out of positions. But even if that wasn’t the case, there was a much bigger trade in the November $90 calls:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Unlike the October position, the OI in this contract was only 14, which suggests Wednesday’s volume included a large trader opening a new position—a view supported by the fact that most of the volume (more than 6,600 contracts) occurred in a single trade in the first 30 minutes of trading.
Raising the profile of all this activity is the fact that MSM is scheduled to release earnings two weeks from today. Since falling to an eight-month low near $75 in mid-June, the stock has traded choppily, swinging as high as $90.22 and as low as $76.02. Yesterday’s rally pushed it fairly close to the middle of that range—around 10% below the call’s strike price:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Wednesday’s trade in the November $90 calls represented roughly 770,000 shares worth more than $69 million. Unusual options positions that appear in the runup to earnings can sometimes mean large traders are taking an interest in what the announcement will bring. As we prepare for a new reporting season, many eyes are likely focused on the market’s highest-profile stocks. Wednesday’s trade activity suggests it’s worthwhile to pay attention to those that fall outside the spotlight, too.
Market Mover Update: November WTI crude oil futures (CLX4) followed through on Tuesday’s dramatic intraday reversal by falling more than 3% intraday (to $71) on Wednesday, but the market recouped nearly all of the loss to close at $73.24.
Today’s numbers include: Delta Air Lines (DAL), Domino’s Pizza (DPZ), Neogen (NEOG), Aehr Test Systems (AEHR).
Today’s earnings include: Consumer Price Index (8:30 a.m.), weekly jobless claims (8:30 a.m.), EIA Natural Gas Report (10:30 a.m.).
Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.