OMX – OfficeMax, Inc. – At least one options investor populating near-term put options on the office supplies retailer this afternoon was properly prepared for the sharp pullback in the price of the underlying stock. OfficeMax shares earlier plunged 6.5% to an intraday low of $9.99 before partially recovering in afternoon trading to stand 3.2% lower on the day at $10.34 just before 1:05 pm ET. It looks like pessimists that were prepared for the significant decline in share price today may have booked profits by rolling previously established long put positions to a more bearish strike price in the September contract. Investors sold roughly 3,000 now deep-in-the-money puts at the September $11 strike for an average premium of $1.10 each in order to buy about the same number of puts at the lower September $9.0 strike for an average premium of $0.35 a-pop. Net profits enjoyed on the roll, without the knowing how much investors initially paid to purchase the September $11 strike put options, amounts to $0.75 per contract. The new long put position may be profitable as well if OfficeMax’s shares plummet 16.3% from the current price of $10.34 to breach a new 52-week low and average breakeven price of $8.65 by expiration day next month.
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