The market is taking off and some very unusual call option plays are taking off too. One of the most unusual AND large call buys this afternoon was in Owens Corning (OC).
What makes this so unusual is the size of the buy and the short term aspect of the calls. A trader bought 6,854 of the August $35 calls in Owens Corning (OC). The buyer paid as much as 50 cents for those calls. Not a lot of time for those calls to pay off! Assuming a 40 cent average cost, that little bet is worth over $274,000.
Right now, Owens Corning (OC) is trading up 59 cents to $34.44 on the day. Volume is lighter than average at just under one million shares. Average vol is about 1.66 million per day. OC has a 52 week high of 46.64 and a low of $33.71, so this trader obviously thinks it’s bottomed out and is ready for a quick rebound. The only question is what is the catalyst. He/she knows, but the rest of us have to wait for the news.
Owens Corning (OC) announce earnings on July 23 so we know it’s not about earnings leakage. So naturally, our best guess turns to the very real possibility of a big upgrade on the way from one of the usual suspects.
OC has 19 analyst firms covering it’s stock, and the average rating is an “overweight”. The average price target among those firms is $43.87. Looking at those numbers, it’s hard to imagine a big upgrade coming, but it certainly isn’t out of the question. The last movement on ratings was July 31 when RBC reiterated it’s sector perform and lowered it’s price target from $40 to $37. Maybe the monkeys at Cantor Fitzgerald are set for a big upgrade, since they currently have a HOLD rating with a price target of $15.50.
We’re really not sure what to make of this trade to be honest. It’s a little too short term, yet 6800 plus call options can’t be wrong, right? So we aren’t buying the August $35 calls. Instead we are going to nibble at the September $35 calls.