Options Activity Alert: TIF, P, NYT

By May 24, 2012, 2:33 PM Author's Blog  

TIF – Tiffany & Co., Inc. – A surprise earnings miss and a reduced full-year profit and sales forecast from luxury jewelry retailer, Tiffany & Co., took some of the luster out of its shares today, with the stock trading down 8.5% at $56.55 as of 11:50 a.m. in New York. Options activity on Tiffany this morning suggests mixed sentiment on the stock going forward, with some strategists bracing for further declines in the price of the underlying, while others position for a rebound. Fresh interest building in the July $57.5 strike put, where more than 800 in-the-money contracts changed hands against open interest of 114 positions, appears mostly to be the work of buyers. Traders paid an average premium of $3.74 apiece for the put options and may profit at expiration in the event that Tiffany’s shares decline another 4.9% to settle beneath the effective breakeven price of $53.76. Meanwhile, a call spread in the August expiry looks for shares in the jeweler to post solid gains during the next few months. A 242-lot Aug. $57.5/$65 call spread purchased for an average premium of $2.50 per contract may result in maximum potential profits of $5.00 per contract should TIF’s shares soar 14.9% to top $65.00 by August expiration.

P – Pandora Media, Inc. – Shares in Pandora are moving sharply to the upside this morning after the provider of Internet radio reported better-than-expected first-quarter earnings after the close of trading on Wednesday and an increase in target share price to $16.00 from $14.00 at JMP Securities. The stock rallied as much as 19.0% to $12.285 today, reaching their highest level since March, but trading in the January 2013 expiry puts suggests some strategists are securing disaster insurance on the stock. It looks like traders picked up 200 puts at the Jan. 2013 $4.0 strike for a premium of $0.25 apiece, perhaps under the expectation there could be catastrophic declines in the share price in the next seven months or, alternatively, to hedge a position in the underlying shares against a low-probability event. The stock would need to lose nearly 70.0% of its value in order for the contracts to land in-the-money at expiration next year.

NYT – New York Times Co. – Call options on the media company are active today, with shares in New York Times Co. trading higher by 1.1% on the day at $6.38 just before 12:50 p.m. ET. Traders positioning for shares in NYT to extend gains focused in on the July $7.0 strike call, where more than 700 contracts changed hands against open interest of 555 contracts. Traders paid around $0.26 in premium per contract to buy roughly 530 contracts, adding to bullish positions established earlier this month at an average premium of $0.15 each. Call buyers paying an average of $0.26 per contract today may profit at expiration in July if shares in NYT rally another 13.8% to settle above $7.26. Shares in New York Times Co. last traded above $7.26 back in February. The company reports second-quarter earnings on July 19th, a few days prior to July options expiration.

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