Options Activity Alert: SJM, LVS, KKD

By Aug 17, 2012, 12:47 PM Author's Blog  

SJM – J.M. Smucker Co. – Bullish bets initiated on branded food maker, J.M. Smucker Co., earlier this week are paying off for some strategists following the release of the company’s first-quarter earnings report ahead of the opening bell. Better-than-expected first-quarter earnings and revenue along with the firm’s full-year earnings guidance now at the top end of its previously forecasted range sent the price of the underlying stock soaring 6.5% to a new all-time high of $84.10 this morning. Traders positioning for a post-earnings report pop in the share price picked up around 250 of the Aug. $80 strike puts earlier this week for an average premium of $0.70 per contract. These calls, which are in their final day of trading before expiration, are now deep in-the-money, displaying a last-traded price of $3.70 as of 12:10 p.m. in New York. Traders who paid $0.70 apiece for the contracts have seen the value of the call options quadruple this week. Meanwhile, fresh bullish action in Smucker’s call options spread to the Sept. $85 strike where approximately 330 calls were purchased for an average premium of $0.65 apiece. The trader or traders purchasing the contracts profit if shares in SJM continue high to top a fresh record-high of $85.65 by September expiration.

LVS – Las Vegas Sands Corp. – Shares in the casino resort operator slumped to a 52-week low of $34.72 at the end of July on concerns over slowing growth in China and as gaming growth in Macao slipped to its lowest level in three years. But, the stock has managed to pare some of its losses during the first few weeks in August, rising 1.25% to $41.69 this morning, marking a 20% rebound in the price of the underlying off the July low. A debit call spread initiated in the weekly options expiring next Friday suggests one options player is positioned to benefit from further gains in the price of the underlying in the near term. It looks like the trader purchased a 500-lot Aug. 24 ’12 $43/$45 call spread for a net premium of $0.22 apiece. The position starts making money if shares in LVS rally 3.7% to surpass the breakeven price of $43.22, and makes maximum potential profits of $1.78 per contract in the event shares surge 8% to top $45.00 by expiration next week. Failure of the shares to make the necessary upside moves during the next five trading sessions could result in the full loss of premium paid to establish the position. Shares in Las Vegas Sands Corp. are down more than 30% off the multi-year high of $62.09 reached back in April.

KKD – Krispy Kreme Doughnuts, Inc. – Options activity suggests at least one options trader is sweet on Krispy Kreme Doughtnuts ahead of the company’s second-quarter earnings report after the closing bell on August 22nd. Shares in the Winston-Salem, North Carolina-based seller of the signature hot Original Glazed® doughnuts and other sweet treats rallied as much as 6% this morning to $6.94, the highest since May, after the stock was rated new ‘Outperform’ with a target share price of $9.00 at Wedbush. Upside calls at the Sept. $7.0 strike are the most active contracts on KKD this morning after one trader purchased around 460 lots at a premium of $0.30 apiece. The call buyer stands ready to profit at expiration next month should Krispy Kreme’s shares add 5% to today’s high of $6.94 to exceed the breakeven price of $7.30. Like-minded bulls appear to have purchased a few hundred of the $7.0 calls yesterday at a premium of $0.20 apiece. Premium required to buy Sept. $7.0 strike call options has tripled since Monday.

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