Market Overview

Unusual Option Opportunity In Starwood Hotels and Resorts

Related HOT
Goldman Neutral On Lodging; Says Buy Marriott, Sell La Quinta
Marriott's Share Repurchases May Not Commence Until 2017

According to Options and Volatility, shares of Starwood Hotels and Resorts (NYSE: HOT) saw unusually high options activity on Wednesday. Notably, the September 75 calls traded 8,658 contracts versus only 32 open interest, with August 77.50 call options also seeing above average volume as well.

In addition to the increased volume, the implied volatility on the September 75 calls rose, moving from 30.08 percent on Tuesday's close to 34.97 percent on the close Wednesday, an increase of over 16 percent. While the stock dropped $0.58 on the day, the September 75 call actually increased by $0.17 due to the heightened buying pressure. This set up a covered call opportunity, buying shares and selling a September 75 call for each 100 shares purchased.

Options and Volatility noted this captures a 0.69 percent edge and positions bullishly along with the large call buyer. The September 75 calls have a delta of 56, while the covered call position has a slightly less bullish delta of 44. Starwood Hotels has already reported earnings on July 30, with the next earnings date not until late October.

Disclosure: The author had no position in Starwood Hotels and Resorts at time of publishing.

Posted-In: Long Ideas Options Markets Trading Ideas


Related Articles (HOT)

View Comments and Join the Discussion!