To see the underlying
data in the Most
Active Options
(MOSO) function,
click here.Here, the alert reports
that volume in PG&E
options was seven
times the average.Fig. 1 BAI stories on options volume surges publish when trading in options on a company’s stock
exceeds three times the average.{NI VOLSPKBAI
trading in a liquid stock is at least three times higher than
the 20-day average volume for that time of day.
CONSIDER THREE EXAMPLES in which these kinds of BAI alerts
signaled market events that emerged later.
PG&E: A Possible Settlement
On June 5, BAI picked up bullish signals on shares of PG&E Corp.,
the San Francisco-based power company that sought Chapter 11
bankruptcy protection in January because of potential liability
from California’s deadly wildfires.
PG&E shares opened at $18.74 on June 5, unchanged from
the previous day’s close. At 10 a.m. New York time, a BAI story
noted that option volumes had surged, led by the June $22 calls
(FIG. 1). (Call options grant the right to buy shares at a specified
strike price on or before expiration.) Then, at 2:16 p.m., a second
BAI story reported that the volume of social media postings related
to PG&E had quadrupled and that sentiment on Twitter was some-
what positive. At 3:15 p.m., another BAI article reported that implied
volatility had jumped, reaching the 88th percentile of its levels
during the preceding 12 months.
Right before the market closed, news reports said that PG&E
was putting together an $11 billion pool of capital to settle its wild-
fire claims. The stock closed at $20.75, an increase of almost 11%.
For options traders who don’t believe in coincidences, the
potential upside was even greater: The June $22 calls rose 145%
on the day.Mylan: A Deal
On July 23, a BAI alert pointed out that trading in options on shares
of specialty drugmaker Mylan NV had swelled. The most-traded
contract was the September $20 calls. Later another story noted
that volume in Mylan bonds was more than twice the average: Trading
totaled $51 million at 5 p.m., vs. an average of $21 million (FIG. 2).
The next day another alert showed another surge in options volume.
The following Monday, July 29, Mylan announced it was com-
bining with Pfizer Inc.’s off-patent drug unit in an all-stock deal.<GO> INSIDE THE TERMINAL 45