optionMONSTER's Jon Najarian on Unusual Options Activity in Yoku, Oil and ETFs

Did you see any unusual options activity in Yoku prior to their merger announcement?

Jon Najarian: In fact we did. Last Friday, and we thought it was probably a play ahead of the earnings, and while that could've been the case, now, after this deal gets announced between Yoku and another Chinese competitor, it seems more likely that this was a play on that.

What they did was they came in and bought a little more than 9200 of the March 28 calls for $0.70 and they sold March 30 calls for $0.25 creating a 2 point bull-call spread. Since they did that one-to-one, that pays off pretty big for these guys as the stock traded up through $31 in the pre-market on Monday. That is interesting and I imagine people are going to take a pretty hard look at it to see if maybe someone had tomorrow's newspaper today.

What does unusual options activity in a liquid ETF mean?

Jon Najarian It occurs quite frequently. These days, it seems to be in the active ETFs. Otherwise, there is enough volume in most ETFs that people would pay attention to. There are hundreds of ETFs that people rarely invest in, and yet there are some that attract an inordinate amount of trading volumes.

The SLV, the GLD--as far as sectors of the market--are two of the most popular along with XLF. And, when we see unusual activity in those, it is usually strong enough to make a bull case that someone is buying a longer term trade in those contracts, setting themselves up with less risk than owning the futures. It is probably the hedge funds and/or money managers looking for alpha with a limited amount of downside risk. Generally, they take those shots at a support or resistance level, and from what I've seen they do pretty well on those bets.

What do you guys have coming up at the end of the month?

Jon Najarian: We're having an event coming up in Newport Beach, California at the former Four Seasons. If you go to www.investlikeamonster.com you can see all about it. We've got Anthony Scaramuci, Guy Adami, my brother Pete (Najarian), Jeff Macke, Dan Fitzpatrick, the guys from Options Animal--its a full, one-day, intense investing and trading conference--not just options, but charts and all the rest.