HRB – H&R Block, Inc. – Bearish investors bombarded the provider of tax, banking, business and consulting services in afternoon trading after Standard & Poor’s Ratings Services lowered its rating outlook on the company to stable from positive. The downgrade weighed heavily on HRB’s shares, which fell as much as 6.20% to an intraday- and new 52-week low of $12.54. Shares are currently down 4.95% at $12.71 with one hour remaining before the closing bell. Given the new 52-week low of $12.54, HRB’s shares are down 21.5% since trading at $15.97 on August 2, 2010. The stock has lost a total of 46.15% of its value since January 21, 2010, when shares reached the current 52-week high of $23.29. Investors wary of continued bearish movement in the price of the underlying are picking up put options on H&R Block like they are going out of style. Approximately 5.9 puts changed hands on the stock for each single call traded as of 3:05 pm ET. More than 22,000 puts traded at the October $10 strike versus previously existing open interest at that strike of just 340 put options. It looks like bears bought at least 11,700 of those puts for an average premium of $0.18 apiece. Another 7,400 puts traded to the middle of the market at the October $10 strike. Put buyers are poised to profit should HRB’s shares plunge 22.7% lower to breach the average breakeven price of $9.82 by October expiration. Investors coveted 2,300 puts at the higher October $11 strike for premium of $0.29 per contract. Longer-term bearish players picked up roughly 4,300 puts at the January 2011 $10 strike by shelling out an average premium of $0.49 a-pop. The explosion in demand for put options on the stock today helped lift HRB’s overall reading of options implied volatility 19% to 46.33%. Options traders exchanged more than 45,200 contracts on HRB versus overall existing open interest on the stock of 104,244 lots by 3:10 pm 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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