WMS – WMS Industries, Inc. – Long-term bullish options trading on the maker of gaming machines is nearly identical to the optimism observed on International Game Technology (for analysis of IGT activity please see below). One investor enacted a three-legged options combination play on WMS today despite the nearly 3% decline in the value of its shares to $41.91 as of 1:33 pm (ET). The trader partially financed the purchase of debit call spread by selling short put options in the January 2011 contract. It looks like the bullish individual picked up 1,000 calls at the January 2011 $45 strike for a premium of $5.10 each, and sold the same number of calls at the higher January 2011 $55 strike for $1.50 apiece. Finally, the trader shed 1,000 puts at the January 2011 $35 strike for a premium of $2.60 a-pop. The net cost of the transaction is reduced to $1.00 per contract. Therefore, the optimistic trader is prepared to profit should WMS Industries’ share price increase at least 9.75% to exceed the effective breakeven point to the upside at $46.00 by expiration day. Maximum potential profits of $9.00 per contract are attainable as long as shares of the underlying stock jump 31.2% from the current price of $41.91 to exceed $55.00 by January 2011 expiration.
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.
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.
Visit: Interactive Brokers