AMR – AMR Corp. – Options investors employed a number of bullish trading strategies on the parent company of American Airlines this morning after a JPMorgan Chase & Co. analyst named AMR Corp. his top pick among U.S. carriers. AMR’s shares increased as much as 6.75% today to touch a four-month high of $8.38. A number of optimistic individuals engaged in plain-vanilla call buying in order to position for continued near-term appreciation in the price of the underlying stock. Traders picked up approximately 5,100 now in-the-money calls at the November $8.0 strike for an average premium of $0.52 apiece. Call buyers at this strike make money if AMR’s shares trade above the average breakeven price of $8.52 by November expiration. Bullish sentiment spread to the higher November $9.0 strike where another 2,200 call options were purchased for an average premium of $0.12 a-pop. Options traders holding these contracts are poised to profit in the event that AMR Corp.’s shares surge 8.8% in the next few weeks to surpass the effective breakeven price of $9.12 by expiration day. Meanwhile, another bullish player sold roughly 10,000 puts at the December $7.0 strike to take in premium of $0.18 per contract. The put seller keeps the full premium received on the transaction as long as AMR’s shares exceed $7.00 through expiration day in December. The investor could wind up having approximately 1 million shares of the underlying put to him at an effective price of $6.82 each should the December $7.0 strike puts land in-the-money at expiration. Increased demand for options on AMR Corp. lifted the stock’s overall reading of options implied volatility 10.8% to 56.02% by 12:15 pm in New York trading.
CASY – Casey’s General Stores, Inc. – Shares of the Iowa-based operator of convenience stores in The Heartland fell as much as 7.7% at the start of the trading session to hit an intraday low of $38.25 after takeover talks between Casey’s and 7-Eleven Inc. fell apart when the two companies were unable to agree on a price. 7-Eleven, the biggest convenience store chain in the U.S., upped its offer to $43.00 a share in cash from $40.00, but Casey’s said the new offer does not reflect the value of the company or its potential for growth. CASY’s shares are currently down 4.2% to stand at $39.71 as of 11:20 am in New York. Casey’s General Stores popped up on our ‘hot by options volume’ market scanner this morning after one bearish player purchased a put spread in the November contract. It looks like the trader picked up 2,500 now in-the-money puts at the November $40 strike for a premium of $1.05 each, and sold the same number of puts at the lower November $37.5 strike at a premium of $0.10 apiece. The net cost of the transaction amounts to $0.95 per contract thus positioning the investor to make money should CASY’s shares slip beneath the effective breakeven price of $39.05 ahead of November expiration. Maximum potential profits of $1.55 per contract are available to the put spreader if shares fall 5.6% from the current price of $39.71 to trade below $37.50 by expiration day. CASY’s overall reading of options implied volatility jumped more than 28.5% to 24.59% in early morning trade, but is currently up a lesser 17.3% to arrive at 22.44% as of 11:30 am, now that the market has started to digest news of the failed takeover talks.
AIG – American International Group, Inc. – It looks like options players are initiating bullish bets on the insurer ahead of the firm’s third-quarter earnings report, which is scheduled for release before the market opens on Friday. AIG’s shares are currently up 2.8% at $43.30 just before 12:40 pm after earlier rising as much as 4.7% to reach an intraday high of $44.10. Near-term out-of-the-money call options are popular today, with the November $46 strike attracting the most volume by midday. Traders coveted roughly 1,000 calls at the November $44 strike for an average premium of $1.30 apiece, and picked up some 1,400 calls at the higher November $45 strike at an average premium of $0.89 a-pop. More than 5,490 calls changed hands at the November $46 strike and the majority of the contracts were purchased for an average premium of $0.59 each. Call buyers at this strike make money if AIG’s shares jump 7.6% over the current price of $43.30 to trade above the average breakeven point at $46.59 by November expiration day. The November $50 strike calls were also well trafficked and enticed bullish players to pick up some 2,300 lots at an average premium of $0.27 apiece. Options implied volatility on AIG is up 6.1% at 39.46% on increased demand for option contracts today and ahead of earnings. Investors have exchanged 48,900 options on American International Group, Inc. as of 12:45 pm in New York trading.