Options Activity Alert: XLF, LVS, BZH

XLF – Financial Select Sector SPDR ETF – Traders positioning for financial stocks to extend gains on the heels of Thursday’s FOMC announcement are loading up on XLF call options this morning. Shares in the Financial Select Sector SPDR ETF earlier rallied as much as 1.8% to hit a new 52-week high of $16.44. Overall options volume on the fund is well above 500,000 contracts as of 11:35 a.m. ET, with the call-to-put ratio hovering just below 10-to-1. The Oct. $17 strike call has changed hands more than 320,000 times so far today against open interest of 215,271 positions. Much of the previously opened positions were established yesterday as traders stepped up to purchase the contracts for an average premium of $0.07 apiece. This morning, it looks like buyers are once again in the driver’s seat, paying an average of $0.12 per contract for the $17 strike call options. Traders getting long the contracts at around $0.12 apiece stand ready to profit at expiration next month if the price of the underlying rallies another 4% over today’s high of $16.44 to top the average breakeven price of $17.12. Shares in the XLF are off their highs of the day, up 0.90% at $16.30 as of 11:50 a.m. in New York.

LVS – Las Vegas Sands Corp.– Shares in the resort casino operator are up sharply today, trading 4.0% higher on the day at $47.21 just before 12:30 p.m. in New York. The Fed’s decision to extend its bond buying program and a number of analyst upgrades on Las Vegas Sands helped lift demand for bullish options on the stock this morning. A number of options market participants appear to be betting that shares in LVS have more room to run in the near term. Plain-vanilla call buying is prevalent across several out-of-the-money strikes in the September and October expiries. Traders positioning to benefit from strong performance in the shares next week snapped up around 1,000 of the Sep. 21 ’12 $47.5 strike calls at an average premium of $0.54 each, and purchased another 1,800 calls at the $48 strike at an average of $0.40 apiece. Buyers of the $47.5 and $48 strike calls may profit at expiration next week in the event LVS shares rally at least another 1.8% and 2.5%, respectively, to top breakeven prices at $48.04 and $48.40. Meanwhile, one strategist initiated a 600-lot Oct. $49/$52.5 call spread at a net premium of $0.61 per contract. The strategy reduces the cost of taking a bullish stance on the stock, but also limits potential gains to the upside. The trader is positioned to profit should shares in LVS rally 5% to exceed the breakeven point at $49.61, with maximum possible profits of $2.89 per contract available given an 11% move higher to $52.50 by expiration next month. Shares in LVS last traded above $52.50 back in May.

BZH – Beazer Homes USA, Inc. – Bullish options in play on the builder of single- and multi-family homes today are looking for shares in Beazer Homes USA to hit new 52-week highs in the near term. The stock increased as much as 12% in the first half of the trading session to touch an intraday high of $3.93. Traders preparing for the price of the underlying to extend gains snapped up around 4,000 calls at the Oct. $4.0 strike for an average premium of $0.20 apiece. Call buyers make money as long as shares in Beazer Homes rally another 9% over the current price of $3.84 to exceed the average breakeven point at $4.20 by October expiration.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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