Unusual Option Opportunities SunEdison

According to Options and Volatility, shares of SunEdison Inc.

saw unusually high options activity on Wednesday. Notably, the August monthly August 25 calls traded 10,869 contracts versus only 122 open interest. The August 24 puts saw heavy volume as well, with 21,079 contracts trading versus only 247 open interest. The trade was likely done as a strangle, buying 2 puts for every 1 call bought. The total dollar outlay for the trade was roughly $5,000,000. In addition to the increased volume, the implied volatility on the both the calls and puts increased dramatically. The August 25 calls rose from an implied volatility of 64.71 on Tuesday to 77.54 on Wednesday's close, while the August 24 puts moved in a similar fashion, going from 64.97 to 74.59. Due to the increased buying pressure and concomitant lift in implied volatility, the price of both the calls and puts rose significantly. With SUNE closing down 0.25 on the day at 25.55, the August 25 calls actually rose in price, moving from 2.15 on Tuesday's close to 2.29 on the Wednesdays close. The August 24 puts also moved sharply higher as well. moving up 0.31 from 0.94 to 1.21, exceeding the 0.25 drop in the stock. Options and Volatility notes that traders can look to capture the implied volatility spike with a covered call trade, buying shares of SUNE and selling a August 25 call for each 100 shares purchased. The August 25 calls have a delta of 58, while the covered call position has a slightly less bullish delta of 42. A similar trade could be structured by selling an August 24 put, which has a delta of 34. More sophisticated traders may want to sell the strangle to capture both the call and put implied volatility spike simultaneously, although that trade would entail being naked calls. SUNE has earnings expected on August 6, but according to Options and Volatility, the earnings are reflected in the August2 weekly options. Disclosure: The author has no position in SUNE at the time of publishing.