GMCR – Green Mountain Coffee Roasters, Inc. – News the specialty coffee company plans to increase the price of its single-serving coffee packs, known as K-Cups, by 10% to 15% starting October 11, 2010, fueled an 8.75% rally in the firm’s shares price to an intraday high of $33.94. Green Mountain cited mounting green coffee prices and other short-term cost increases as impetus for its decision to charge more for K-Cups. Investors expecting the coffee maker’s shares to continue higher ahead of September expiration looked to the September $33.33 strike where at least 2,000 now in-the-money calls were picked up at an average premium of $0.74 apiece. Call buyers make money if GMCR’s shares trade above the average breakeven price of $34.07 by September expiration day. Bullish sentiment spread to the higher September $35 strike where traders purchased approximately 1,400 call options for an average premium of $0.29 a-pop. Investors long the calls stand ready to profit if Green Mountain’s shares surge 4.00% over today’s high of $33.94 to exceed the average breakeven point at $35.29 by expiration this month.
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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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