DAL – Delta Air Lines, Inc. – The U.S. carrier’s shares are adding to yesterday’s post-earning rally, and are currently up 3.10% to stand at $13.37 as of 11:50 a.m. in New York. It looks like one bullish investor expecting Delta’s shares to at least hold on to the majority of recently realized gains initiated a three-legged credit put spread in the January 2011 contract. The trader sold 8,000 puts at the January 2011 $12.5 strike for premium of $0.93 each, picked up 4,000 puts at the lower January 2011 $10 strike for $0.25 in premium apiece, and purchased another 4,000 puts at the January 2011 $9.0 strike at a premium of $0.14 a-pop. The investor pockets a net credit of $0.54 per contract on the trade and keeps the full amount of premium received as long as Delta’s shares exceed $12.50 through January expiration. The investor responsible for the credit spread could wind up having shares of the underlying stock put to him at an effective price of $11.96 apiece if the January 2011 $12.5 strike puts land in-the-money by expiration.
RSH – RadioShack Corp. – The retailer of consumer electronics goods popped up on our scanners this morning after investors initiated bullish plays in the November contract. RadioShack’s shares are up 2.50% at $22.89 as of midday. Options traders may be positioning for shares to climb higher following the release of the firm’s third-quarter earnings report before the market opens on October 25, 2010. Investors exchanged more than 2,610 calls at the November $26 strike versus previously existing open interest of just 1 contract at that strike. It looks like approximately 1,200 of those calls were purchased for an average premium of $0.26 apiece. Call buyers are poised to profit should RadioShack’s shares surge 14.7% over the current price of $22.89 to surpass the average breakeven point at $26.26 by November expiration. The November $25 strike calls were also popular with traders today as more than 1,500 lots changed hands at that strike versus existing open interest of 164 contracts.
MOT – Motorola, Inc. – A large buy-write or covered call strategy enacted on the wireless communications company in the January 2011 contract caught our eye this morning. Motorola’s shares are currently down 2.00% as of 12:40 p.m. to stand at $7.80. The mobile device maker reports results for the third quarter before the market opens next Thursday. It looks like the options trader responsible for the buy-write sold 21,000 in-the-money calls at the January 2011 $7.5 strike at a premium of $0.65 per contract, and purchased 2.1 million shares of MOT stock at a price of $7.81 each. The hefty premium received for writing the calls effectively reduces the purchase price of the underlying shares to $7.16 each. Thus, the investor is positioned to amass maximum potential gains of 4.75% on the “rise” in shares from $7.16 to $7.50 if the large underlying position is called from him at $7.50 a share by expiration day.
