On CNBC's "Options Action," Mike Khouw said there is usually a lot of activity in the options market ahead of a catalyst for a stock.
In Splunk Inc SPLK, there was a lot of activity after the company reported a disappointing earnings report. Splunk traded more than 38 times its average daily call options volume on Thursday and most of that activity was concentrated in December 4 expiry.
Traders were buying the December $160, $165 and $170 strike calls, betting there could be some intraday volatility. Khouw thinks this is one of the situations when traders can use options to their advantage.
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