Ten days ago, I talked about a trade in Blackstone's ATM and OTM options expiring on March 18, 2016. Back then, the market was in a continual downfall, so the trade seemed irrational, coupled with the fact that Blackstone has been posting poor results for the last three quarters. The main motivation to buy these options was the unusual activity in them noticed by trader Jonathan Rose back in January. Just to remind, the combined open interest for the $30 and $31 calls is equivalent to over 11M shares in BX's stock: (Source: Yahoo Finance) So what has changed in the last ten days? First, the stock rose from about $24 per share to over $26 per share: (Source: Google Finance) This has not changed the prices of the OTM options for the following reasons: - Time decay and a drop in implied volatility have put a downward pressure on the options' value; - Open interest has increased (92,368 contracts vs 91,252 contracts) meaning that more people are buying into this position (seems that mostly retail investors as the increase is dismal in percentage terms). What we can conclude from the above is that now there is a chance to buy the options even cheaper in terms of implied volatility, even though their price has not changed. This is advisable only if you have a big appetite towards risk and the underlying thesis is convincing for you. In the meantime, ATM options with a strike of $25 actually gained about 25% since the initial recommendation ($1.74 vs. $1.39 ten days ago), fees and taxes excluded. There are 28 days left in this trade, and the open interest is not declining. This means that the owner of this position is either confident in this trade or crazy. Because this is most likely an institutional trade, I assume that the person knows something we do not know. Yesterday, I conducted by Jonathan Rose where he talked about unusual options activity and gave real life examples. In the webinar, he also quoted a comprehensive study done on merger-related options activity. The study concluded that there is insurmountable evidence of insider trading in options trading revolving around M&A activity in the market. I am obviously not implying that the trader who made the 9M share bet on Blackstone has used material non-public information. What I want to get across to the readers is that it is sometimes beneficial to ride the institutional investors' tails. One point I want to emphasize is that you have to be careful with the unusual options activity. Sometimes, institutions are not buying or selling options to make a trade. They frequently do it for hedging purposes. For example, in this particular case, the institutional investor could buy OTM calls to hedge his short position (i.e. create a synthetic put). This is very plausible. The good news is that this trade has already been analyzed on the stock market and no evidence of this sort of arrangement has been found. Do you have the guts for this trading idea?