Unusual Options Activity

1. AAN- Another 500 Feb $30 calls were bought for $2.30-$2.45 each, against open interest of 3,382 contracts. On average, only 149 calls trade per day. If shares are able to hold above the $31 resistance level through the close it will setup for a measured move to $33 in the near-term. Read more about the initial call activity in Aaron’s here.
2. DFS- The Apr $52.50/$60 bull risk reversal was put on 2,500 times for a $0.05 credit today. Volume was above the open interest in both options. Option activity was 11x the average daily volume. This trade is profitable as long as the stock stays above the short put strike ($52.50) and see sizable gains if Discover Financial Services shares rally above $60 by April options expiration. Last night, the company reported weaker than expected Q4 EPS and revenue results that sent shares lower by 8% this morning (down less than 6% currently). While the headline numbers were disappointing (shares down for the 4th straight week heading into the results), credit card loans were up 5.6%, personal loans rose 19.5%, net interest income jumped 7%, and Discover did buyback about $400M worth of stock in the quarter. Following the results RBC Capital kept the stock as a Top Pick and even raised the price target to $72 from $70.
3. GHDX- 3,000 Mar $30 puts were sold for $1.05 each, against open interest of 598 contracts. On average, only 23 puts trade per day (total option open interest of 1,587 contracts). He/she is betting that Genomic Health shares will be able to hold above the $30 support level through March options expiration (Q4 earnings due out on February 2nd). The $1B molecular diagnostics company trades at a price to sales ratio of 3.64x and is expected to grow revenues by 11.5% in 2015 to $310M+ (20% short interest).
4. NES- Someone rolled out 2,500 Mar $5 puts ($2.85 credit) into 5,000 Mar $2.50 puts ($0.90 debit) today. Volume was above the open interest in the Mar $2.50 puts. He/she bought the Mar $5 puts on Christmas Eve for $1.21-$1.30. They are now taking profits on those puts for more than a double, but still sees downside below $1.60 through March options expiration. Put activity is 24x the average daily volume. Nuverra Environmental Solutions, an oil & gas environmental solutions company, has fallen about 90% since the June highs. The company was losing money and the collapse in oil didn’t help its situation either as revenues are likely to drop 3-4% in 2015.
5. RTRX- The June $10/$15/$20 bull call spread risk reversal was put on more than 2,800 times for a $0.45-$0.50 debit. Volume was above the open interest in all three options. Breakeven on this trade is at $15.45-$15.50 and a maximum gain of $4.50-$4.55 (900%+) can be achieved if shares close at $20 or above on June options expiration. Option activity is 29x the average daily volume. Shares of Retrophin are setting up for a retest of the $14.50 resistance level that has been in place for several months. If it able to breakout then the stock is likely to return to the low $20’s later this year. On January 12th, Retrophin ($367M rare disease treatment company) acquired the exclusive right to purchase cholic acid from Asklepion Pharmacueticals for $5M upfront and potentially $73M on approval and net sales.

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AAN DFS GHDX NES RTRX unusual options activity