One investor expects Starwood Hotels & Resorts Worldwide to ring in the New Year with a bang.
optionMONSTER's tracking programs detected the purchase of almost 5,300 January 45 calls for $1.90 against open interest of just 1,702 contracts. While such activity would be bullish in isolation, it occurred just minutes after a huge block of HOT shares was sold, indicating that a delta-neutral strategy was at work.
Because the trader sold stock and bought calls, he or she is directionally neutral on the underlying shares. The trader will instead profit from option premiums increasing, which would result from a greater amount of implied volatility in the name or the broader market. (See our Education section)
HOT fell 2.42 percent to $44.32 yesterday. Investors have mostly ignored its strong financials the two last times it reported earnings, letting the stock mostly follow the S&P 500 lower in recent months.
Implied volatility on the broader market has been falling as well despite continued worries about the European debt crisis. Based on the correlation between the HOT and the SPX, yesterday trade might represent a bet that volatility in the broader market will spike in coming weeks.
Overall option volume was triple the daily average in the session.
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