Options Trading News

July 23, 2014  Wed 10:14 AM CT

A large trader is playing the volatility in shares of Digital Realty Trust ahead of the company's earnings report next week.

optionMONSTER systems show that 3,524 September 65 calls were sold in a single print for $0.70 against open interest of just 36 contracts. That was essentially was all of the morning's volume, which is about 8 times DLR's full-session average for the last month.

Seconds later, a block of 110,000 shares of DLR was bought for $62.62. Combined with the short calls, this creates a delta-neutral strategy position is focused more on volatility than the direction of the stock in coming weeks. (See our Education section)

DLR is up 0.92 percent to $62.86 today, its highest level since exactly a year ago. Shares of the real-estate investment trust have been trending higher from support at $50 since late March. 

Digital Realty is scheduled to announce quarterly results on July 29. The implied volatility is 19 percent, while the historical volatility is just 10 percent.

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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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