Options Activity Alert: T, FXE, OI

By May 23, 2012, 12:53 PM Author's Blog  

T – AT&T, Inc. – U.S. equities are on the decline as Europe’s woes once again take center stage. Shares in AT&T, down 0.90% at $33.24 this afternoon, are faring better than most of the other Dow components so far, though options activity on the wireless carrier suggests some strategists are bracing for further declines ahead of the long weekend. Traders exchanged more than 6,800 puts at the May 25 ’12 $33 strike against open interest of 646 open positions, and appear to have purchased the bulk of the volume at an average premium of $0.17 apiece. Bearish positions in the $33 strike weekly puts may be profitable at expiration should shares in AT&T settle below the average breakeven price of $32.83.

FXE – CurrencyShares Euro Trust – Bearish positions initiated yesterday in FXE options are worth far more on Wednesday as the Euro, and of course the Euro Currency Trust that mirrors its performance, continue to slide on fears Greece may leave the euro. Traders betting on further weakness in the currency on Tuesday picked up around 1,000 of the May 25 ’12 $125 strike puts for an average premium of $0.16 apiece. As of Wednesday afternoon just before 12:30 p.m. ET, these same contracts cost $0.60 apiece, or nearly four times as much. Overnight profits are also available for those effectively taking a short position in the currency on Tuesday. Buyers of around 1,000 deep in-the-money put options at the $127 strike for an average premium of $0.71 apiece yesterday could currently sell those contracts at $2.10 apiece for a net gain of nearly 200.0% on the position. The FXE currently trades 0.96% lower on the day at $124.96 as of 1:10 p.m. in New York.

OI – Owens-Illinois, Inc. – The maker of glass containers for brewers, vintners, distillers and food producers popped up on our ‘hot by options volume’ market scanner this morning due to heavier than usual activity in the August expiry contracts. Shares in Owens-Illinois have lost nearly 25.0% of their value in the past four weeks and are being hit hard again today, currently down 3.5% at $18.95 as of 1:00 p.m. in New York. But, it looks like one or more options traders are positioning for the price of the underlying to potentially rebound this summer. More than 3,500 calls are in play at the Aug. $21 strike versus open interest of just four contracts. It appears most of the contracts were purchased for an average premium of $0.88 apiece, thus positioning call buyers to profit in the event shares in OI soar 15.5% in the next few months to exceed the average breakeven price of $21.88 at August expiration. Shares in Owens-Illinois traded above $21.88 as recently as last week.

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