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Market Overview

Unusual Option Opportunity In Navistar


According to Delta Derivatives, shares of Navistar International (NYSE: NAV) saw unusually high options activity on Thursday. Notably, the October 20 calls traded 7,606 contracts versus only 198 open interest, with no other Navistar call options trading more than 31 contracts.

In addition to the increased volume, the implied volatility on the October 20 calls rose, moving from 48.60 percent on Tuesday's close to 51.66 percent on the close Wednesday, an increase of 6.3 percent. With the shares down $0.35 on the day, the October 20 calls closed unchanged. This set up a covered call opportunity, buying shares of Navistar and selling an October 20 call for each 100 shares purchased.

Delta Derivatives noted this captures a 1.14 percent edge and positions bullishly along with the large call buyer. The October 20 calls have a delta of 35, while the covered call position has a slightly more bullish delta of 65. Navistar has already reported earnings on June 4.

Shares closed down $0.35 to $17.96 on Thursday, with the October 20 calls closing flat at $0.83.

Disclosure: The author had no position in Navistar at time of publishing.


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