With Blackstone’s shares up over 5% today, crossing the $27 mark, the $30 March calls I talked about approximately two weeks ago, do not seem that remote anymore. In fact, there is still a 13% chance that the stock will end up above $30: (Source: option-price.com) Keep in mind that a $1 move in the stock will increase the chance of the option being in-the-money to over 24%. The reverse is also true: a $1 drop in the underlying will decrease the chance to a meager 4%. Despite that, it seems that the market is back in a rally. We do not know how long the rally is going to last, especially in Blackstone’s stock, but here is another interesting option trade I found in Blackstone: (Source: Google Finance) Apparently, some institutional investor is short 9M shares worth of Blackstone’s stock from $45. In other words, his counterparty hopes that the stock will rise above $45 per share in the next 300+ days. How likely is that? Keep in mind that the stock has to rocket by over 50% for the option to be in-the-money. The chances are slim: (Source: option-price.com) In fact, the above table shows that there is only an ~8% chance for the stock to end up that high on the chart (you have to look at the Delta figure). This is a lottery ticket, isn’t it? Well, not quite so. I did a bit more research and learned when and why this trade was made. Originally, this was a 60K contract order done in November 2015 to lower the cost basis of the stock position (i.e. the premium from the sale offsets the purchase price of the shares): Traders sold 60,000 January 2017 45 calls for $0.61 and $0.62. The trade was probably done against long shares to earn income on a bullish position. BX is down 1.06 percent to $31.91 (Source: optionmonster.com) The corresponding chart is given below: (Source: optionmonster.com) As you can see, the stock was on the rise as the options trade was being consummated. This means that at least two-thirds of the open interest in the $45 strike is due to the covered call position initiated by an institutional investor. Moreover, we cannot be sure that the counterparty to this trade was not the market makers, who could pretty much spread the risk of this trade over other strike prices and stocks with different expiration periods. Hence, there is unlikely a crazy person who took the bet, hoping for a 50% price increase (the stock was about $31 per share back in November 2015). On the other hand, here is a very good lesson for you: institutional investors tend to sell covered calls on stocks to earn extra income or lower their cost basis (this is called an “options wheel strategy”. You can learn more about it here). And you should do that, too!