USB – U.S. Bancorp – The financial services holding company reported better-than-expected third-quarter net income of $0.45 a share this morning versus the average estimate of $0.43 in profits per share. Despite the positive earnings report shares of the fifth-largest U.S. commercial bank by deposits turned negative by 11:40 a.m. after having risen modestly earlier in the session. USB’s shares are currently down 0.20% to stand at $22.76. One options strategist anticipating continued erosion in the value of U.S. Bancorp’s shares purchased a put spread in the January 2011 contract. The trader picked up approximately 5,000 puts at the December $22 strike for an average premium of $0.74 each, and sold the same number of puts at the December $19 strike at an average premium of $0.18 apiece. Net premium paid to establish the bearish spread amounts to $0.56 per contract. Thus, the put player is poised to profit should USB’s shares fall 5.80% from the current price of $22.76 to breach the average breakeven point to the downside at $21.44 by December expiration. Maximum potential profits of $2.44 per contract are available to the investor should the financial services firm’s shares plunge 16.5% lower to trade under $19.00 by expiration day. Options implied volatility on U.S. Bancorp is down 11.4% at 27.19% following the release of third-quarter earnings this morning.
VLTR – Volterra Semiconductor Corp. – Shares of the maker of semiconductors for computing, storage, networking and consumer markets fell 3.40% to $18.98 in early afternoon trading. One bearish investor expecting the price of the underlying shares to head lower by November expiration established a put spread this morning. The trader purchased approximately 3,650 in-the-money puts at the November $20 strike for an average premium of $1.72 each, and sold about the same number of puts at the lower November $17.5 strike for a premium of $0.47 apiece. The net cost of the transaction amounts to $1.25 per contract. Profits are available to the put player if Volterra’s shares slip beneath the average breakeven price of $18.75 ahead of expiration day next month. Maximum potential profits of $1.25 per contract are available to the investor should shares of the semiconductor company plunge 7.80% to trade below $17.50 by November expiration. The spread may represent a hedge by an investor holding VLTR stock ahead of the firm’s earnings report or an outright bearish bet on the near-term performance of the stock. Volterra is scheduled to reveal its performance for the third quarter after the closing bell on October 25, 2010.
KR – Kroger Co. – Options investors are augmenting near-term bullish positions on the operator of retail food and drug stores today with the price of the underlying shares rising as much as 1.45% to an intraday high of $21.73 as of 11:55 a.m. in New York. Kroger popped up on our scanners in the first half of the session after bullish players sold 5,000 puts at the November $21 strike for an average premium of $0.25 apiece. Put sellers keep the full $0.25 premium per contract received today as long as Kroger’s shares exceed $21.00 through November expiration. Analyzing put open interest at the November $21 strike reveals that like-minded bulls shed roughly 5,000 puts at that strike on Monday for an average premium of $0.15 each. Adding to short interest in put options indicates these traders expect shares to exceed $21.00 through expiration next month. Investors are also indicating that the premium of $0.15 to $0.25 per contract pocketed on the sale is sufficient compensation for bearing the risk that the puts land in-the-money at expiration, and the shares are put to them at an average price of between $20.85 and $20.75 each.