Mike Khouw Sees Unusual Options Activity In Wells Fargo

On CNBC's Options Action, Mike Khouw spoke about a big options trade in Wells Fargo & Co WFC. He said that put options volume was two times higher than the average daily volume in the week ahead of earnings results. The stock usually moves 3.5 percent on average on earnings and the options market is currently implying a move of 2 percent, which means that options are cheap, explained Khouw.

He noticed that somebody bought 30,000 contracts of the November 40 puts for $0.20 on Monday. The break even for the trade is at $39.80 or approximately 13 percent lower from the current stock price.