HRB – H&R Block, Inc. – Investors are bulking up on H&R Block put options this afternoon following reports the provider of tax services acquired tax-preparation firm 2SS Holdings for $287 million in cash. HRB’s shares dropped like a rock today, falling as much as 10.445% during the session to hit an intraday low of $12.26. Options traders basically ignored the existence of H&R Block calls and instead focused their efforts on buying up bearish put contracts across several expiries. More than 7.95 put options changed hands on HRB for each single call option in play on the stock as of 3:15 p.m. in New York trading. The sharp increase in demand for put options and the rapid descent in the price of the underlying shares fueled a 33.3% rise in the overall reading of options implied volatility on the stock to 70.39% late in the trading day. Pessimistic players picked up 5,600 now in-the-money puts at the October $12.5 strike for an average premium of $0.24 each. These contracts expire tomorrow, but investors may make money if HRB’s shares trade below the average breakeven price of $12.26 ahead of expiration. Put volume is most significant in the November contract. It looks like investors picked up 9,300 puts at the November $10 strike at a premium of $0.38 each, coveted another 10,300 contracts at the November $11 strike for premium of $0.57 apiece, and purchased approximately 2,500 puts at the November $12 strike for a premium of $0.81 a-pop. Volume in put options generated at each of the strikes described outweighs previously existing open interest at each one many times over. Put players may be scrambling to secure downside protection on existing positions in the underlying shares, or could be enacting outright bearish bets on the stock. HRB’s shares are down 9.50% at $12.39 with 35 minutes remaining in the trading session.
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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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