GPS – Gap, Inc. – Apparel retailer, Gap, Inc., popped up on our scanners this morning after a sizable trade was initiated in the August expiry put options. Nearly 5,000 of the Aug $46 strike puts changed hands close to the start of the session versus open interest of 778 contracts. Volume in the Aug $46 puts is more than twice the stock’s average daily options volume of around 2,100 contracts. Shares in GPS, up roughly 40% since the start of 2013, are off 0.30% on the day to stand at $46.33, hovering just below a multi-year high of $46.56 reached last week. Options changing hands on the retailer this morning suggest one trader is bracing for near-term weakness in the price of the underlying. It looks like the strategist purchased around 4,000 Aug $46 puts at a premium of $0.86 per contract. The trade starts making money if shares in Gap decline 2.6% from the current price of $46.33 to breach the effective breakeven point on the downside at $45.14 by August expiration next week. The long put position may be an outright bearish bet on the stock or a protective stance to hedge a long position in the shares. Gap, Inc. is scheduled to report second-quarter earnings on August 22nd, the week following expiration of the Aug 16 ’13 options.
TWX – Time Warner Inc. – Options changing hands on media and entertainment company, Time Warner, today look for shares in the name to potentially come off the multi-year highs highs hit earlier in the session. Shares in TWX earlier rose 0.70% to $64.72 ahead of the company’s second-quarter earnings release prior to the opening bell on Wednesday. Shares in Time Warner are up nearly 60% since this time last year. A sizable trade in front month puts suggests at least one strategist is bracing for the price of the underlying to slip after earnings. The Aug $62.5 strike puts are the most actively traded options on TWX as measured by volume, with nearly 2,400 puts traded against open interest of 220 contracts. It looks like one options player purchased the $62.5 puts at a premium of $0.57 each during the first 10 minutes of the trading session. The long put position may be profitable at August expiration should the price of Time Warner shares dip 4.3% from the current level to trade below the breakeven price of $61.93.
FST – Forest Oil Corp. – Shares in Forest Oil Corp. kicked off the trading week in negative territory, declining as much as 3.7% at the start of the session to $4.95. Put activity on the oil and gas company this morning indicates some traders are preparing for the price of the underlying to extend losses in the near term. Overall options volume in excess of 10,300 contracts as of midday is well above Forest Oil Corp.’s average daily volume of around 2,400 contracts ahead of the company’s second-quarter earnings report after the close on Tuesday. The most actively traded contracts by volume on FST today are the Aug $5.0 strike puts, with roughly 5,300 lots in play against open interest of 984 contracts. Time and sales data suggests most of the $5.0 puts were purchased this morning for an average premium of $0.25 apiece. Put buyers stand ready to profit at expiration next week in the event that Forest Oil shares slide 6.3% from the current price of $5.07 to settle below the effective breakeven point at $4.75. Shares in FST last traded below $4.75 in mid-July. The stock touched a record low of $3.77 at the end of June.