The PennZone

SAN FRANCISCO - PennZone -- Large in the money call options on Roblox's stock are due to expire at the end of the month. In the money stock options offer traders a leveraged way to gain exposure to the underlying stock. They are frequently referred to as stock replacement trades because they require less capital to put on, but they present directional risk just as if you owned the underlying equity directly. These traders are betting over $13 million that the stock price of Docusign will at least be $120 by the end of the month.

View the latest unusual options activity for Roblox (RBLX) stock

Why are options such an important indicator for future stock price movements?

Options have traditionally been thought of as a hedge instrument, but because of the amount of leverage they have, they are also used by large institutional buyers to capitalize on large upcoming stock movements.

More on The PennZone

• Senco Home Services Expands Residential Construction Services
• Ricci's Painting & Contracting Expands Home Transformation Services
• United Way and Community Partners Launch Relief Fund to Support Victims of the Six-Alarm Fire in Allentown
• Sylvester Anthony III Introduces His Artist Journey with Debut Single "Cherish"
• Boston Industrial Solutions Introduces High-Performance Primer for Bonding Liquid Silicone to Epoxy

What is unusual option activity?

Each day, there are millions of options trades. However, not all trades are made equal. Certain trades contain more information than others. Unusual option trades are one example.

Unusual options activity is defined as a single trade that is bought on the ask or sold on the bid, with unusual volume and/or trade size compared to the open interest for that particular strike and expiry. This means that these are new contracts being traded, expressing a fresh opinion on the underlying stock.

Why is this interesting? Well given a large enough trade and it being bought on the ask or sold on the bid it shows extreme urgency on the trader's side.

For example, let's look at a trade of 5,000 calls which had a bid and ask spread of $3.00 by $3.70 respectively, and the order was executed on the ask at $3.70.

More on The PennZone

• Together We Thrive: Kingdom Life Health & Career Fair Unites Faith, Wellness and Opportunity
• Healthcare Leaders Publish New Integrated Behavioral Healthcare Guide, Led by Doctors of Behavioral Health
• Verbica Challenges Panetta to a Televised Debate on the Issues
• Grace Montessori School Raises $115,000 for Student Scholarships and Enhanced Programming
• Salt Lake City Families Turn to Private Autopsy Services for Faster Answers After Unexpected Loss

What does that tell us?

The trader bought 5,000 call contracts, dropping $1.8M on the trade. Now, if they were patient and waited to fill the order in the middle of the bid and ask spread, say $3.35, they could have saved potentially $175K, but they didn't. To me, that says they have high expectations for this trade, and saving $175K is chump change.

This paired with the unusual high daily volume and size of the trade makes this type of trade very interesting, carrying a signal that there is a likelihood of a potential large move in the underlying stock. Unusually large purchases of options contracts indicate that someone thinks there is an impending event that will move a stock in a big way.

Optionsonar makes it very easy to stay in the loop on the latest unusual options activity by using a proprietary algorithm that was once only available to institutional traders on Wall Street.