Oi! Interest in options opens up

●Brunswick (BC) had a high number of new options positions yesterday

●Stock tagged support on Monday before rallying Tuesday


For Brunswick (BC), the recreation-centric company most people know from things like pool tables and bowling lanes (bet you didn’t know they had a marine engine division), it was “game on” yesterday.

Brunswick popped up on a LiveAction scan for options with a high level of open interest (OI). Brunswick options had, in fact, the ninth-highest OI level among individual stocks—366% of their average—around 90 minutes into the trading day:

LiveAction scan: Unusual Open Interest. Nearly 4x average new options positions

Source: OptionsHouse

Open interest simply means the number of yet-to-be closed options positions: When traders liquidate existing options positions, OI decreases; when they establish new positions, OI increases. So, yesterday traders were establishing nearly four times the average number of new BC options positions—in other words, they were more interested than usual in BC.

Jumping over to a daily price chart may offer one possible explanation. On Monday the stock fell to $48.48, tagging the support implied by the October 29 swing low that has been the stock’s bottom since it retreated from its mid-September record high around $70:

Brunswick (BC), 9/28/18–12/11/18. Brunswick (BC) daily price chart. Testing a recent low.

Source: OptionsHouse

Yesterday’s bump in options activity also coincided with a rally in BC shares, which were up more than 2% in the early afternoon even after a 1%-plus gain in the S&P 500 (SPX) had given way to a loss.

If yesterday’s stock rally and new options positions were about traders expecting a bounce in BC off support, it likely wasn’t just because the stock was testing its late-October low. The weekly chart below shows this level has functioned as support since August 2017, with BC bouncing or rallying off it in October and November 2017, and again this October:

Brunswick (BC), 4/21/14–12/11/18. Brunswick (BC) weekly price chart. A long-term floor.

Source: OptionsHouse (data)

Another piece of interesting information that emerged in recent days was that, according to one source, the number of hedge funds buying the stock increased by 13% (from 30 to 34) in the third quarter. According to the source, although that level doesn’t make BC one of the top-30 hedge fund stocks, it is higher than average.1

There’s no way to know if support will hold again, but if bulls have been getting into the stock the past few days, they’ve been able to do it at a level with well-defined (and relatively low) risk.

Market Mover Update: UnitedHealth Group (UNH) has formed a swing low after pulling back from the record high noted in “The search for the legendary buyable dip.”

After initially recouping some of Monday’s big drop, yesterday the British pound reversed intraday to close down and near the bottom of its range.

Today’s numbers (all times ET): CPI (8:30 a.m.), Atlanta Fed Business Inflation Expectations (10 a.m.), EIA Petroleum Status Report (10:30 a.m.).

Today’s earnings include: Nordson (NDSN), Oxford Industries (OXM), Tailored Brands (TLRD).


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1 InsiderMonkey.com. Do Hedge Funds Love Brunswick Corporation (BC)? 12/10/18.