On May 16 we saw a trader add to an existing position in Dollar General (NYSE: DG), buying 35,083 of the DG Aug 57.5 Calls for $1.55. At the close of that day’s session, total open interest in the line exceeded 70,000 contracts.
In Monday’s session, we saw this same institutional trader roll their (profitable) position to November expiration. Monday this trader sold 72,982 Aug 57.5 Calls for $2.10. Assuming an entry price of $1.55 for the entire block, this represents over $4 million in profit (over $2 million for the 35k block bought on May 16).
The trader rolled into the November expiration, buying 61,666 DG Nov 62.5 Calls for $2.35. With nearly $15 million of premium at stake, this represents one of the largest orders by dollar amount we have seen this year. Dollar General trades an average of nearly 5 million shares per day, and Monday’s order has potential to control over 6.1 million shares.
Note, DG stock traded 10.2 million shares yesterday, over twice average volume. While partly attributable to end of quarter institutional activity, much of yesterday’s uusually high stock volume was from market makers hedging their short calls with long stock to be delta neutral.
When trading based on unusual options activity, we try to track past performance for orders in individual stocks. It would seem the individual behind this trade knows what he or she is doing, indicating a potentially strong setup to the long side in Dollar General.
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