Option Activity Alert: NWL, GRS, OIH

NWL – Newell Rubbermaid, Inc. – The global marketer of everyday commercial and consumer products popped up on our ‘hot by options volume’ market scanner during the second half of the trading session due to bullish activity in the December contract. Shares in Newell Rubbermaid are up 3.35% to stand at $17.33 with 45 minutes remaining before the final bell. Options traders exchanged more than 3,460 call options at the December $17.5 strike, versus previously existing open interest of just 980 contracts. It looks like more than 3,000 of the calls were purchased for a premium of $0.35 per contract. Plain-vanilla call buyers are prepared to make money should shares increase another 3.00% to exceed the effective breakeven point to the upside at $17.85 ahead of December expiration day. Rubbermaid’s shares last traded above $17.85 as recently as November 5, 2010.

GRS – Gammon Gold, Inc. – Bullish players picked up call options on the gold mining company today with shares of the Halifax, Nova Scotia-based firm climbing 1.2% to $6.77 in the final hour of the session. Investors expecting Gammon’s shares to extend gains purchased more than 3,000 calls at the January 2011 $7.0 strike for a premium of $0.43 apiece. Call buyers at this strike are poised to profit should shares in Gammon Gold surge 9.75% over the current price of $6.77 to surpass the effective breakeven point at $7.43 by January expiration. More than 3,280 calls changed hands at the Jan. 2011 $7.0 strike, which is more than six times the number of contracts represented by the 531 lots of previously existing open interest at that strike. Bullish sentiment spread to the March 2011 $7.5 strike where another 1,000 call options were purchased for premium of $0.48 each. Investors holding these contracts profit if shares jump 17.9% to trade above the breakeven price of $7.98 by expiration day in March.

OIH – Oil Service HOLDRS Trust – Shares of the Oil Service HOLDRS Trust hit new 52-week highs today, but one options trader is positioned to see the price of the underlying rise another 7.0% by January 2011 expiration. The price of the underlying fund increased as much as 3.6% today to secure an intraday- and new 52-week high of $134.85. The bullish player initiated a call spread, buying 3,500 lots at the January 2011 $144.1 strike for a premium of $1.72 each, and selling the same number of calls at the higher January 2011 $154.1 strike at a premium of $0.44 each. Net premium paid to establish the spread amounts to $1.28 per contract. Thus, the trader stands ready to make money should OIH shares rally another 7.8% to surpass the effective breakeven point to the upside at $145.38 by January expiration day. Maximum potential profits of $8.72 per contract are available to the investor should shares of the fund jump 14.275% over today’s high of $134.85 to trade above $154.10 ahead of expiration in January.

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.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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