Unusual Options Activity

1. C- In the first two hours of trading call activity was more than 50% above the average daily volume at 86K+ contracts. This action was primarily buying in the Mar 20 option expiration (buyer of 7,500 Mar 20 $54.50 calls for $0.83). In total the call to put ratio was just under 3:1. Citigroup shares are up for the fifth consecutive week, but still have room to run before hitting near-term resistance at the $55 level. The stock trades at a P/E ratio of 10.04x (2015 estimates), price to sales ratio of 2.31x, and a price to book ratio of 0.81x. This morning JPMorgan Chase upgraded shares to overweight from neutral and raised their price target to $58 from $54. See below on SpringLeaf about the recent deal they did that is helping both stocks.
2. FAST- Someone rolled out 10,000+ Mar $43 puts for $1.75 (paid $1.55 on February 4th) into 11,000 Mar $41 puts for $0.70 each. Volume was above the open interest in the Mar $41 puts. The put to call ratio was 11:1 and put activity was 30x the average daily volume (implied volatility +7.2% to 25.12). Shares of Fastenal have been trending lower for several months and could be in the process of retesting the October lows just below $40. Despite the decline the stock isn’t all that cheap of a valuation basis either with a P/E ratio of 21.78x (2015 estimates), P/S ratio of 3.29x, and a P/B ratio of 6.41x. Wall Street analysts still see the company growing the top and bottom line in the lower double digit range over the next couple of years.
3. GOGO- An unusual amount of calls traded in the Apr and May monthly options expirations has resulted in call activity being 5x the average daily volume. The bulk of the action was due to more than 2,000 each of the Apr 17 $19 and $20 calls be purchased on the offer, volume being above the open interest in both. Gogo shares had been consistently putting in lower highs over the last year, but now the stock is starting to eclipse the November high of $19.09. The $1.7B airline wifi service provider is not yet profitable, but growing sales by 20-25% on an annual basis. Gogo trades at a P/S ratio of 3.85x and a P/B ratio of 7.95x. On February 26th, they beat Q4 EPS and revenue estimates and issued solid FY15 guidance.
4. ILMN- Nearly 2,800 Mar 20 $195 calls were bought for $3.00-$3.90 each, against open interest of 1,566 contracts. The call to put ratio was 19:1 and call activity was almost 3x the average daily volume. Illumina shares are down on 6 out of the last 7 trading sessions. This pullback is bringing the stock within striking distance of testing support at the 100-day simple moving average (bounced there in November and December). Illumina is a $27.6B healthcare company that develops life science tools. The company has plans to help provide clinicians with less invasive and faster, cheaper ways to assess cancer and response to therapy in liquid biopsies. Currently the stock trades at a rich P/E ratio of 60.02x (2015 estimates), P/S ratio of 14.99x, and a P/B ratio of 19.05x. However, earnings and sales are going around 20% annually and are likely to continue doing so in the foreseeable future.
5. LEAF- 1,000 Apr $50 calls were purchased for $3.00 each, against no previous open interest (100,000 shares of stock traded around the same time). On average, just 84 total options trade per day. This trader is coming in after SpringLeaf Holdings, a $5.6B consumer lending company based out of Evansville, Indiana, agreed to buy Citigroup’s OneMain Financial for $4.25B in cash. This merger brings total customers (mainly low income borrowers) to roughly 2.5M with about 2,000 branches in the country. SpringLeaf expects the deal to add $470M to their bottom line in 2017 (Q4 earnings out on March 12th).

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C FAST GOOG ILMN LEAF unusual options activity