Stock Options Watch: PFE, AEO, DDD

PFE – Pfizer, Inc. – Shares in Pfizer are among the few stocks in the Dow Jones Industrial Average that are trading higher today, up 0.80% on the session at $29.61 as of midday in New York, amid a down day for U.S. equities. The stock is on the rise after the drug maker announced the reorganization of its commercial operations into three business units. Weekly call options changing hands on the pharmaceutical company today indicate some traders are preparing for shares in the name to extend gains during the next four trading sessions. Upside call buyers looked to the Aug 02 ’13 $29.5 and $30 strike calls, snapping up more than 4,400 calls at the $29.5 strike for an average premium of $0.22 each. The contracts, most of which appear to have been purchased by one trader, make money at expiration in the event that Pfizer’s shares settle above the breakeven price of $29.72. It looks like traders purchased more than 2,800 calls at the Aug 02 ’13 $30 strike at a premium of $0.09 apiece. Buyers of the $30 weekly calls stand read to profit at expiration should shares in Pfizer rise another 1.6% to exceed $30.09.

AEO – American Eagle Outfitters – Options changing hands on teen retailer, American Eagle Outfitters, on Monday morning indicate at least one strategist is positioning for shares in the name to declines in the near term. Shares in AEO are off 0.40% to stand at $19.12 as of 11:55 a.m. ET. The Aug $19 strike put options are the most actively traded contracts as measured by volume on the retailer today, with around 5,600 lots traded versus open interest of 2,732 contracts. Most of the puts appear to have been purchased by one trader this morning for an average premium of $0.36 apiece. The bearish stance on American Eagle is profitable at expiration if shares in the name decline 2.5% from the current price to trade below the average breakeven point at $18.64. Shares in AEO, down roughly 9.0% since this time last year, had traded below $18.64 as recently as July 22nd.

DDD – 3D Systems Corp. – Shares in 3D Systems are ripping higher on Monday, up as much as 6.7% to $50.54 during morning trading, the highest level since mid-May. The stock is moving higher after it was rated new ‘Buy’ with a 12-month target price of $60.00 at Brean Capital. Upside call options trading on 3D Systems this morning suggest some traders are positioning for further upside in the price of the underlying this week. More than 3,000 of the Aug 02 ’13 $50 strike calls have changed hands on DDD today versus open interest of 1,169 contracts, with most of the volume purchased in the early going for an average premium of $2.00 apiece. Traders long the calls stand ready to profit at expiration this week should shares in 3D Systems rally another 3.9% over the current price of $50.04 to exceed the breakeven price and new all-time high of $52.00. Far out of the money calls in play on DDD are also attracting fresh interest today, with more than 1,000 lots traded at the Aug 02 ’13 $55 striking price versus open interest of 258 contracts. It looks like most of the calls were purchased during the first hour of the trading day for an average premium of $0.65 each. Buyers of the $55 strike weekly calls may profit at expiration should shares in 3D Systems Corporation rally another 10% over today’s high of $50.54 to surpass the average breakeven price of $55.65.

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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