Options Update: Call Volume Spike on AIG

Yesterday was a good day for financial firms, as regional bank stocks were pushed higher by potential merger and acquisition news. The Wall Street Journal reported that British banking giant Barclays was considering the purchase of a U.S. retail bank.

Specifically the article cited SunTrust, Fifth Third, and Comerica as potential targets. One of the big-name banks turning in a strong performance was ^AIG^, which followed Tuesday’s eight-percent gain with another outstanding performance on Wednesday.

Moreover, the streak of positive days for AIG extends back to last Friday. Some contend that the positive action for AIG is stemming from a short-squeeze situation. One thing is certain; following an eight-percent gain with one greater than 10 percent is sure to catch some eyes – and that is exactly what AIG did in the option pits.  

Understandably, traders are scrambling to get in on some of the AIG action with March call options seeing the greatest activity. Looking at the day’s action, the contracts with the greatest volume were on the call side of the equation. The March 40 call saw the heaviest activity with volume of 37,944. With open interest at the strike totaling 15,988 it is a safe bet that most of the day’s action was new contracts (either sold or purchased).

The March 45 call saw similar activity, as volume was 22,921 and open interest was just 5,680. The March 35 strike’s volume checked in at 16,312 – less than the open interest of 17,738. Finally we see some put activity, as the March 35 strike saw volume of 14,846 with open interest of 1,100.

Digging into the numbers a bit, there were some trades of 200 contracts here and 300 contracts there (most likely institutional trades); but, none were massive in nature.

Dan Passarelli is the author of the book Trading Option Greeks and founder and CEO of Market Taker Mentoring LLC. Passarelli began his trading career trading on the floors of the Chicago Board Options Exchange and the Chicago Board of Trade making markets in options. He regularly shares trading insights and educational tips in his options blog (markettaker.com/options_blog/). Dan can be reached through his website MarketTaker.com and can also be followed on Twitter at twitter.com/Dan_Passarelli.

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