Options volume on Hillshire Brands Co. (HSH) is well above average this morning, with roughly 7,000 contracts changing hands during the first hour of the session versus the stock’s average daily volume of around 200 contracts. Almost all of today’s trading traffic in HSH options is concentrated in the February expiry calls, perhaps as some traders position for the price of the underlying to move ahead of or following the company’s second-quarter earnings release the morning of January 30th.
Shares in Hillshire Brands are bucking the trend, with the stock up roughly 1.1% on the day at $34.89, amid a down day for U.S. stocks. Call activity on HSH in the early going suggests some traders are positioning for shares to extend gains and potentially blow through the current 52-week high of $37.28 by expiration next month. The most traded Hillshire options so far today are the Feb $37 strike calls, with around 5,000 contracts in play against open interest of just five contracts. Time and sales data indicates most of the volume was likely purchased for an average premium of $0.56 each. Traders long the calls may profit at expiration if shares in Hillshire rally more than 7.0% over the current price of $34.89 to top the average breakeven point at $37.56.
The Feb $36 strike calls are also seeing some of the action, with volume in those contracts nearing 1,900 lots as of 10:50 a.m. EST. Traders this morning appeared to be snapping up the $36 calls at an average premium of $0.76 each. Premium required to buy the $36 calls has steadily climbed since the open, with the current asking price on the contracts hovering near $1.00 apiece as of the time of this writing.
Chart – Hillshire Brands Feb21 ’14 $36 Call
(click to enlarge)