Option Activity Alert: VCI, EXPR, XLE, LVS

VCI – Valassis Communications, Inc. – Shares in the media and marketing services company increased as much as 2.2% at the start of the trading day to hit an intraday high of $28.00, but relinquished much of the morning’s gains to stand just 0.20% higher on the session at $27.46 as of 12:50pm. One bearish options strategist appears to be positioning for Valassis Communications’ shares to tumble ahead of June expiration. It looks like the trader purchased a put spread, buying around 1,500 now in-the-money puts at the June $27.5 strike for a premium of $2.30 each, and selling the same number of puts at the lower June $22.5 strike at a premium of $0.50 apiece. Net premium paid to initiate the transaction amounts to $1.80 per contract and prepares the investor to make money should shares in VCI drop 6.4% from the current price of $27.46 to breach the effective breakeven point on the spread at $25.70 by expiration in June. Maximum potential profits of $3.20 per contract are available to the investor should Valassis’ shares plunge 18.1% to trade below $22.50 by June expiration.

EXPR – Express, Inc. – The specialty retailer of apparel and accessories popped up on our ‘hot by options volume’ market scanner this morning after a number of calls changed hands in the front month. Options on Express, Inc. may be more active today ahead of the firm’s fourth-quarter earnings report, which is scheduled for release ahead of the opening bell on Tuesday. Shares in Express earlier rallied 1.6% to secure an intraday high of $17.38, but slipped this afternoon to stand 0.70% lower on the session at $16.98. Options traders exchanged more than 2,400 in-the-money calls at the April $16.94 strike today on open interest of just 312 contracts. It looks like much of the volume at that strike was generated by buyers positioning for the price of the underlying shares to rally in the near term. The sharp rise in demand for Express calls helped lift the stock’s overall reading of options implied volatility 18.8% to 53.15% as of 12:45pm.

XLE – Energy Select Sector SPDR Fund – Some options traders are initiating bullish positions on the XLE this morning, with the price of the underlying fund currently trading 2.85% higher on the session at $77.54 as of 12:05pm in New York. Call spreads were purchased in the April contract by traders prepared to see shares in the ETF potentially reach their highest since July 2008 by expiration next month. It looks like one or more bullish players picked up 6,000 calls at the April $78 strike for an average premium of $1.50 each, and sold the same number of calls at the higher April $82 strike at an average premium of $0.30 apiece. The net cost of establishing the spread amounts to $1.20 per contract. Thus, traders start making money in the event that the XLE’s shares rally another 2.1% over the current price of $77.54 to surpass the average breakeven price of $79.20 by expiration day. Maximum potential profits of $2.80 per contract are available to call-spreaders should shares in the fund rally 5.75% to trade above $82.00 before the contracts expire. Options implied volatility on the XLE dropped 10.9% to 22.69% in early-afternoon trade.

LVS – Las Vegas Sands Corp. – Shares in Las Vegas Sands Corp. rallied as much as 6.6% during the session to an intraday high of $38.74 after receiving an upgrade to ‘add’ from ‘neutral’ with a target share price of $50.00 at Citadel. Shares in the casino operator are still trading substantially lower than its 52-week high of $55.47 set back on November 5, 2010. The stock touched a 2011 low of $36.05 on March 15, which 35% lower than its 52-week high of $55.47, and around 29.4% lower than the stock’s 2011-high of $51.05. Call options on Las Vegas Sands are in high demand this afternoon, with more than 2 calls trading on the stock for each single put option in action today. More than 5,000 calls changed hands at the March $39 strike on previously existing open interest of 721 contracts. Fresh positioning in the weeklies was also apparent in calls at the higher March $40 and $41 strikes, as well. Call volume is currently greatest at the April $40 strike where more than 5,900 calls traded by 1:30pm. Open interest at that strike, however, is sufficient to cover volume generated during the current session. Options implied volatility on LVS is lower by 7.2% to stand at 46.75% in early afternoon trade.

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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