XRT – SPDR S&P Retail ETF – Options traders are positioning for shares in the Retail ETF to fall substantially in the coming months. Massive bearish bets popped up on the XRT in the first half of the trading session with shares slipping further from last week’s new highs. The familiar outline of a put butterfly spread unfurled in the March contract, but was preceded by a large debit put spread initiated in the April contract within the first 15 minutes of trading. Pessimistic players are perhaps speculating that consumers, who now face heftier prices at the pump, are likely to tighten their grip on discretionary dollars going forward. Shares in the XRT, an exchange-traded fund designed to track the performance of the S&P Retail Select Industry Index, are currently down 2.4% at $48.02 as of 12:00pm in New York. In the past week shares in the ETF have pulled back 5.1% from an all-time high of $50.61 last Wednesday. One big put player is well-positioned to benefit from additional weakness in XRT shares in the near term. The investor purchased 20,000 puts at each of the March $46 and March $42 strikes, and sold 40,000 puts at the central March $44 strike, all for a net premium of $0.22 per contract. The net cost of the pessimistic play pales in comparison to the $1.78 per contract in maximum potential profits the investor enjoys if shares in the ETF drop to $44.00 ahead of March expiration. Meanwhile, the buyer of a 17,000-lot April $44/$47 put spread for a net premium of $0.57 per contract could walk away with up to $2.43 per contract in profits if shares in the fund slip beneath $44.00 by April expiration. Options implied volatility on the Retail SPDR has been on the rise throughout the trading session, and currently stands 12.6% higher on the session at 27.35% in early afternoon trade.
IMAX – IMAX Corp. – A sizable stock and option combination play on the entertainment and technology company today suggests one strategist is near-term bullish on Imax Corp. The delta neutral position initiated a few minutes before 12:00pm this afternoon is a bullish tactic we’ve observed in Imax options in the recent past. The investor responsible for the transaction may be positioning for shares to rebound following the firm’s fourth-quarter earnings report, which is slated for release ahead of the open on Thursday. Shares in the name are currently down 2.2% to arrive at $26.84 as of 1:15pm in New York. It looks like the investor sold around 150,000 IMAX shares at a price of $26.65, and purchased 6,902 call options at the March $30 strike for an average premium of $0.475 per contract. The parameters of the transaction position the investor to benefit most from sharp moves higher in the price of IMAX shares. The trader could still profit on the short stock leg of the transaction if shares fall, but stands ready to amass substantially greater gains if the stock jumps up ahead in the near future.
ADSK – Autodesk, Inc. – Near-term bears that took their seats at Autodesk early on in the trading session established positions that have grown substantially in value in the past few hours as the market continues to melt. Shares in ADSK declined as much as 5.6% in the first half of the trading session to touch down at an intraday low of $39.75. Autodesk is scheduled to report fourth-quarter earnings after the market closes on Thursday. Within 15 minutes of the opening bell, investors expecting shares in the software company to fall purchased approximately 1,700 now in-the-money puts at the March $41 strike for an average premium of $1.67 each, and sold roughly the same number of puts at the lower March $37 strike at an average premium of $0.47 apiece. Net premium paid to initiate put spreads on ADSK amounts to $1.20 per contract. Investors start making money if shares slip beneath the average breakeven point on the downside at $39.80 ahead of March expiration. Put spreaders could walk away with maximum potential profits of $2.80 per contract in the event that Autodesk’s shares decline another 6.9% from today’s low of $39.75 to trade below $37.00 before the contracts expire in March. Options implied volatility on ADSK is up 5.6% at 43.60% as of 12:45pm in New York.
OI – Owens-Illinois, Inc. – Shares in the world’s largest manufacturer of glass containers rallied slightly this morning, but quickly went the way of the market, falling 1.80% this afternoon to $29.57. Yet, much of the activity in Owens-Illinois’ options today appears to be the work of near-term bullish investors. More than 3,700 puts changed hands at the March $29 strike on previously existing open interest of just 234 contracts. It looks like the overwhelming majority of the put options sold for an average premium of $0.45 per contract. Put sellers keep the full premium pocketed on the transaction as long as the price of the underlying exceeds $29.00 through expiration day next month. Investors short the puts are apparently willing to have shares in Owens-Illinois put to them at an effective price of $28.55 each in the event that the puts land in-the-money, and are exercised, at expiration.