Eastman Kodak (NYSE:KODK): Call options on the rise

Eastman Kodak (NYSE:KODK) is one of the Wall Street’s most speculative stock. In late July it ran from low $2s to $60 in 2 days and combined 550M share volume on news of a $765M government loan to set up drug production facilities.

Soon thereafter, it was discovered that top executives got massive options packages right before the announcement. After much bad publicity, the loan was put on hold and multiple investigations were launched. Stock’s been drifting lower ever since, eventually settling in $5.7- $6.3 range.

KODK is by no means a newcomer to traders’ watchlists, but let’s quickly recap the basics:

Recent Development: Two days ago, KODK announced an independent special committee found no violation of law in connection to the loan announcement. KODK stock experience Multiple huge unusual CALL options sweeps throughout yesterday and the day before. The stock volume is back with close to 300mil shares traded in the past 2 sessions.
So what’s cooking ?

  • We love the combination of news-insane volume-options activity and relative strength on day 2.
  • Our plan is to be long on reasonable dips— if the stock opens at 20 and sells to 17, that’s not a reasonable dip; if it opens at 12 and then consolidates in low 10s, we’ll likely be in against 9.5s
  • Assuming it doesn’t fail, don’t underestimate how far this can go. That said, we will be taking profits along the way and the faster it goes— the more we will sell.

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