Stock Options Watch: P, APOL, RPTP

P – Pandora Media, Inc. – Shares in Pandora are spiking today, up as much as 8.3% in the early going to a one-month high of $17.78, after the stock was raised to ‘Outperform’ from ‘Market Perform’ at Cowen with a 12-month target price of $22.00. Options traders snapped up July expiry calls straight out of the gate this morning, initiating bullish positions that benefit from continued gains in the price of the underlying during the next few weeks. The Jul $17 strike options attracted the most volume in early trading, with roughly 3,600 calls in play versus open interest of 2,722 contracts as of 11:00 a.m. ET. Most of the calls appear to have been purchased by one strategist for a premium of $1.25 per contract. The call buyer makes money at expiration next month as long as Pandora’s shares rise 2.6% over today’s high of $17.78 to exceed the effective breakeven price of $18.25. Pandora bulls are also buying Jul $18 and $19 strike calls this morning, with roughly 900 of the $18 strike contracts purchased at an average premium of $0.72, and roughly 500 of the $19 strike calls picked up at an average premium of $0.37 apiece. Shares in Pandora are up 95% since the start of 2013.

APOL – Apollo Group, Inc. – Declines in new enrollments and slumping third-quarter profits reported by the University of Phoenix operator after the close on Tuesday sent shares in the name down substantially on Wednesday. The stock, which will relinquish its spot in the S&P 500 Index and make its way into the S&P Midcap 400 later in the week, fell as much as 8.9% to $17.66 in early trading. Contrarian traders positioning for shares in Apollo to snap back in the near term appear to be buying July expiry calls today. The Jul $19 and $20 strike calls were active in the early going this morning, with roughly 950 of the $19 calls purchased for an average premium of $0.71 each, and some 1,600 of the $20 calls picked up at an average premium of $0.42 apiece. Call buyers stand ready to profit at expiration next month should Apollo’s shares rally 8.7% and 12.6% over the current price of $18.13 to top average breakeven points at $19.71 and $20.42, respectively.

RPTP – Raptor Pharmaceutical Corp. – The biotechnology company popped up on our ‘hot by options volume’ market scanner on Wednesday morning due to heavy trading traffic in upside calls on the stock. Shares in Raptor are up sharply this morning, trading 21% higher on the session at a new 52-week high of $9.80 as of 11:05 a.m. ET, after a press release issued by the company said the Office of Orphan Product Development at the Food and Drug Administration (FDA) granted Raptor orphan drug exclusivity for PROCYSBI (cysteamine bitartrate) delayed-release capsules for management of nephropathic cystinosis patients age six and older. Options traders positioning for shares in Raptor Pharma to extend gains this year picked up August expiry calls on the stock. Bulls appear to have purchased around 150 deep in-the-money calls at the Aug $7.5 strike for an average premium of $1.42, and purchased roughly 400 calls at the higher Aug $10 strike at an average premium of $0.45 apiece. Traders long the $10 calls at $0.45 per contract stand ready to profit at August expiration so long as shares in Raptor rally another 6.6% to top the breakeven point at $10.45.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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