Options Brief: Popular, Inc. (BPOP)

BPOP – Popular, Inc. – The Puerto Rico-based banking services company’s shares commenced the trading session in the red, but quickly rebounded up 1.40% to stand at $2.94 as of 10:45 am (ET). Perhaps the initial decline in the price of the underlying shares inspired the bearish options activity observed in the October contract. It looks like one pessimistic trader sold 5,000 calls outright at the October $3.0 strike to take in a premium of $0.45 per contract. The investor keeps the premium pocketed on the transaction as long as Popular’s shares do not exceed $3.00 by expiration day. If the responsible party is not currently holding a large underlying share position then the short stance in calls is a risky proposition should BPOP’s shares rally ahead of expiration. The investor faces potentially unlimited losses to the upside if Popular’s shares increase 17.35% over the current price to exceed the breakeven point at $3.45. Alternatively, the trader may be selling covered calls. In this case, the investor is apparently happy to have 500,000 shares of the underlying stock called from him at $3.00 if the contracts land in-the-money at expiration.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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