Dan Nathan Sees Unusual Options Activity In Lowe's Companies

On CNBC's Options Action, Dan Nathan analyzed options trading activity in Lowe's Companies, Inc. LOW on a day when the stock dropped 6.19 percent. He said that the stock traded lower on the announcement of a takeover of a retailer in Canada.

Nathan noticed that options trading volume on Wednesday was 10 times higher than the average daily volume and 80 percent of the traded options were calls. When the stock was trading at $66.75, a trader bought 10,000 contracts of the March 67.5/70 call spread for $1.1. The breakeven for the trade is $68.60 and if the stock jumps to $70 at the March expiration, it can maximally make $1.40.

Nathan believes that this could be a leveraged trade, made by someone who already has a long stock position.