Holy DOW!

Dow Chemical (DOW) saw a flurry of activity Friday. Shares of the Midland, MI company were up 3.1%, to $38.04, a new multi-year high, in heavy trading of 18.7 million shares. Meanwhile, options volume surged to 10X the daily average. 89,000 calls and 13,000 puts traded on the ticker. The flow included some timely buying of September 39 calls mid-day and also some very unusual and profitable activity in weekly 38 calls that expired $0.04 in-the-money.

With shares trading for $37.38 midday Friday, a 9,500-lot of September 39 calls traded on DOW for $0.39 per contract on CBOE. A buyer initiated the trade, according to a source on the floor. By noon, more than 14,000 contracts traded. By the closing bell, those same calls were trading for more than $0.80 after the stock gained an additional 1.7. August, January and March 39 calls on DOW were active through mid-day Friday as well.
DOW Daily Contract Volume
Source: Trade Alert


Perhaps the most interesting activity in DOW Friday was in the one-day weekly 38 calls that have since expired. In late-day action, with the stock trading for $37.87, a sweep of 1,435 contracts traded for $0.04 each when the market was $0.00 to $0.04 cents. The interest was unusual because the calls were $0.13 out-of-the-money and only 90 minutes remained in the trading day. Then, Dow continued rallying and hit a high of $38.50. At its best levels, the 38 calls were $0.50 in-the-money and traded for as much as $0.30 per contract.
DOW Options Sweep


Bloomberg had an article about the unusual activity in DOW. The piece, titled Dow Calls Hit Five-Month High Amid Activist Speculation also highlighted the increased interest in the September 39 calls on DOW and noted that activist investor Nelson Peltz has amassed a very big stake in peer DuPont (DD), which said last month that it's considering a spinoff or shedding its chemicals performance unit. Now, investors are possibly speculating that DOW is possibly an activist target as well. We'll see. The stock is ticking down $0.19 to $37.85 Monday morning.

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