Option Activity Alert: Chemed, Penn National Gaming

CHE – Chemed Corp. – Shares of the provider of hospice care as well as various consumer services such as plumbing and sewer cleaning via its Roto-Rooter segment slipped 2.00% to $55.34 as of 3:40 pm ET. Investors with a near-term bearish view on the stock appear to have sold 2,000 calls outright at the November $60 strike to pocket premium of $0.55 per contract. Call sellers keep the full premium received on the trade as long as Chemed’s shares fail to rally above $60.00 by expiration day next month. Investors could start to accumulate losses if CHE shares reverse course and rally 9.4% over the current price to trade above the effective breakeven point at $60.55 ahead of expiration day in November. Options implied volatility on Chemed is up 8.1% at 30.22% as of 3:45 pm ET. CHE is slated to report its results for the third-quarter after the closing bell on October 26, 2010.

PENNPenn National Gaming, Inc. Shares of the owner and manager of gaming properties are up 1.15% to stand at $30.43 as of 12:40 pm ET, but earlier surged 2.73% to an intraday high of $30.90 after receiving an upgrade to ‘buy’ from ‘neutral’ at Merriman Capital. PENN was rated new ‘outperform’ at Wells Fargo Securities last week. Investors expecting the gaming firm’s shares to extend gains picked up 1,680 in-the-money calls at the November $30 strike for an average premium of $1.89 apiece. Call buyers stand ready to make money should PENN’s shares jump 4.80% over the current price of $30.43 to surpass the average breakeven point to the upside at $31.89 by expiration day next month. The current 52-week high on Penn National Gaming is 31.95, attained back on April 27, 2010. The firm is scheduled to report third-quarter earnings ahead of the opening bell on October 21. Options traders exchanged 2,000 calls at the November $30 strike by 12:50 pm ET versus previously existing open interest of just 165 contracts at that strike.

About Andrew Wilkinson 1023 Articles

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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