NSC – Norfolk Southern Corp. – Bullish investors piled into call options on the provider of rail transportation services in the first half of the trading session despite the 1.60% decline in the price of the underlying shares to $52.20. Options traders enacting near-term optimistic stances on the stock perhaps took action today after Norfolk Southern Corp. was rated new ‘outperform’ with a 12-month target share price of $75.00 at Macquarie Research on Wednesday. Bulls purchased approximately 4,700 calls at the July $55 strike for an average premium of $1.14 per contract. Call buyers are poised to profit should Norfolk’s shares reverse course and rally 7.5% over the current price of $52.20 to surpass the average breakeven point to the upside at $56.14 ahead of July 16 expiration. Other options strategists wary of continued erosion in the price of the underlying shares scooped up 1,100 bearish puts at the July $50 strike for an average premium of $0.80 each. Investors long the puts make money if Norfolk’s shares tumble 5.75% lower to breach the effective breakeven price of $49.20 by July expiration. We note Norfolk’s shares have not traded below $49.20 since February 17, 2010. Options implied volatility on the stock jumped 10.6% to 44.64% by 11:25 am (ET).
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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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