BJ – BJ’s Wholesale Club, Inc. – Shares of the warehouse club operator are currently up 10.75% to stand at $40.99 just before 11:30 am (ET), but earlier the price of the underlying stock surged 18.43% to reach an intraday- and new 52-week high of $43.83. BJ’s shares jumped after private equity firm, Green Equity Investors, purchased 5.1 million BJ shares – or 9.5% of the warehouse-club chain – and said the shares are undervalued. Green Equity also revealed plans to discuss taking BJ’s private with the warehouse club’s executives. Options investors scrambled to place bullish trades on the stock, with some traders opting to sell short roughly 1,200 puts at the July $40 strike to pocket an average premium of $0.46 per contract. Put sellers keep the full premium received on the transaction as long as BJ’s share price exceeds $40.00 through expiration day. Investors short the puts are ready and willing to have shares of the underlying stock put to them at an effective price of $39.54 in the event the puts land in-the-money at expiration. Bulls hoping to see BJ’s shares continue higher scooped up approximately 585 calls at the July $45 strike for an average premium of $0.45 apiece. Call buyers stand ready to accrue profits if shares jump 3.7% over today’s highest recorded price of $43.83 to surpass the average breakeven point on the calls at $45.45 by July expiration day. BJ’s overall reading of options implied volatility exploded today, rising 28.4% to 38.08% as of 11:40 am (ET).
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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