It’s been a busy Monday in the options market, with a bunch of unusual and large call buys, and the odd put buy as well. One of the more interesting call buys (multiple) was seen in Black Hills Corp (BKH).
One trader kicked things off around 11 am, buying over 1,000 February $60 calls in BKH. The trader paid $1.55 for those calls. Since that intial trade there have been an additional 750 calls traded in the February 60’s. We are liking this one, so we’ve already jumped in with the smart money.
Why do we like this unusual call buy? For one, Black Hills Corp (BKH) is a very thinly traded stock, trading only 241,000 shares on average daily. Another reason we like it, the open interest for BKH options was negligible across all contracts before this big call buy in the February 60 calls.
This tells us someone knows good news is coming, and they are getting in in a big way before the news hits.
Black Hills Corp (BKH) is up $1.06 today, currently trading at $56.18. It’s got a 52 week high of $62.13 and a low of $46.62.
So what is the catalyst for the call buy? Well, obviously only the call buyer knows for certain. But looking at upcoming events, Black Hills Corp (BKH) announces earnings on August 6th, so that would be a probable catalyst. A leaked earnings surprise always makes for a good call buy.
Another possible catalyst: a surprise increase in the dividend of BKH. That would create a quick jump in the stock price when announced.
Third option, and most common reason lately for unusual call buys, an analyst is buying the calls before announcing a big upgrade, and price target increase. Of course, Black Hills Corp (BKH) already is rated OVERWEIGHT with a price target of $62.00. But an price target increase isn’t out of the question still.
As we already mentioned, we are liking this one a lot and are in for some action. We’ll get more if the price comes down some.