From Schaeffer's Research:
Option volume is heating up lately on Fannie Mae (FNM). In today's session, call volume has ramped up to two times the daily average, after rising to seven times the norm on Tuesday. However, a closer look at today's activity reveals that there's not necessarily a bullish slant to this speculation....
...Digging deeper into the stock's front-month option activity, it looks like one trader has opened a particularly bearish short call spread on FNM. At 9:31 a.m., two blocks of 1,000 contracts each traded on the equity's September 1 call and September 3 call. The lower-strike calls traded at the bid, suggesting they were sold, while the higher-strike calls crossed the tape at the ask, indicating that they were purchased.
With FNM trading at $1.90 at the time this trade was opened, this is a rather aggressive short call spread. The trader needs FNM to fall back below $1 per share by the time September-dated options expire in order to avoid being assigned on the sold calls....MORE