Eastman Kodak (NYSE: KODK) – Analysis of Eastman Kodak Unusual Options Activity
Monday, the actions of Eastman Kodak (NYSE: KODK) has seen unusual activity on options. After the option alert, the stock price fell to $ 5.97.
- Sentiment: bullish
- Option type: SCAN
- Type of business: APPEL
- Expiry date: 2020-09-04
- Exercise price: $ 7.00
- Volume: 3010
- Open interest: 6314
Three indications of unusual options activity
One way that options activity can be considered unusual is when the volume is unusually high. Option activity volume refers to the number of stock contracts traded in a day. Outstanding contracts that have been negotiated, but not yet closed, are called open interest. These contracts are not closed because a buyer did not buy a contract or a seller did not sell it.
Another indicator of unusual option activity is a contract with an expiration date in the distant future. The extra time until a contract expires usually increases the potential for it to increase its time value and reach its strike price. It is important to consider the time value because it represents the difference between the strike price and the value of the underlying asset.
Out-of-the-money contracts are also indicative of unusual option activity. Out-of-the-money contracts occur when the underlying price is less than the strike price of a call option or greater than the strike price of a put option. These transactions are carried out with the expectation that the value of the underlying asset will change drastically in the future, and both buyers and sellers will benefit from a larger profit margin.
Understand the feeling
Options are “bullish” when a call is bought at / near the ask price or a put is sold at / near the bid price. Options are “bearish” when a call is sold at / near the bid price or a put is bought at / near the asking price.
Although the activity is reminiscent of these strategies, these observations are made without knowing the true intentions of the investor when purchasing these options contracts. An observer cannot know for sure whether the bettor is playing the contract up front or whether he is hedging a large underlying position in a common stock. In the latter case, a large investor’s exposure to their short position in common stocks may be more significant than bullish option activity.
Trading options with these strategies
Unusual options activity is a profitable strategy that can greatly reward an investor if they are highly skilled, but for the less experienced trader, it should remain another tool for making an informed investment decision while taking into account other observations.
For more information on option alerts, visit https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts
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