Options Activity Alert: DF, ENR, NKE

DF – Dean Foods Co. – Shares in the producer of a variety of plant-based beverages and branded and private label dairy products started the session in negative territory, but have since turned positive to trade 0.30% higher on the day at $16.59 as of 11:20 a.m. ET. Options on Dean Foods Co. are more active than usual today, with volume in excess of 1,500 contracts versus the stock’s average daily volume of 692 contracts. Strategies in play this morning suggest some traders are positioning for Dean’s shares to tick higher in the near term, while others are bracing for a possible pullback in the weeks ahead. The stock has gained more than 90% since this time last year. A 200-lot Oct. $14/$16 debit put spread initiated at a net premium of $0.35 per contract may be an outright bearish stance on the food and beverage company, or could be a hedge to protect the value of a long position in the shares. The spread makes money if Dean Foods Co. shares decline 6% to breach the breakeven price of $15.65 by October expiration. Maximum potential profits of $1.65 per contract are available on the position in the event DF shares drop 16% to $14.00. Meanwhile, one or more traders preparing for shares in the name to rally ahead of expiration next month purchased more than 720 calls at a premium of $0.40 each. Call buyers make money if DF shares rally 5% to top the average breakeven price of $17.40 by October expiration. Dean’s shares last traded above $17.40 back on August 8th when the stock hit a two-year high of $17.50.

ENR – Energizer Holdings, Inc.– Batteries and consumer products maker, Energizer Holdings, Inc., reaffirmed its fiscal 2012 earnings guidance, said fourth-quarter net income will likely top earnings from the year ago quarter and announced plans to cut payrolls and reduce costs. Shares reacted positively, rallying as much as 10.6% to an intraday high of $75.12 on Tuesday morning, sparking bullish activity in Energizer options. Trading traffic is heaviest in the front month calls, with more than 1,100 in-the-money calls in play at the Sep. $70 strike versus open interest of 437 contracts. Time and sales data indicates early-birds quickest out of the gate this morning are seeing hefty intraday gains in the value of their positions. It looks like most of the volume, roughly 850 Sep. $70 calls, were purchased within the first 3 minutes of the opening bell at premiums of $1.00 and $1.45 apiece. As of the time of this writing, 12:05 p.m. ET, the contracts are deep in-the-money and cost $4.80 each, a 380% increase over the $1.00 premium paid for the contracts near the open. Upside calls are also in play at the Sep. $75 strike where more than 400 contracts were purchased for an average premium of $0.31 each in the first 30 minutes of the session. The Sep. $75 strike calls have tripled in value since this morning, but no longer trade in-the-money with the stock hovering around $74.25. Buyers of the $75 calls could lose the full amount of premium paid for the contracts at expiration if shares end the trading week below $75.00.

NKE – Nike, Inc. – Nike call options with three full trading sessions remaining until expiration are active this morning, with shares in the name up a slight 0.15% to stand at $98.11 as of midday in New York. Some traders may be placing bullish bets on the athletic apparel retailer ahead of the company’s annual meeting on Thursday. The Sep. $100 strike call attracted the heaviest volume in the first half of the session, with more than 7,200 calls in play against open interest of 4,924 open positions. It looks like options traders purchased most of the calls for an average premium of $0.32 apiece this morning to position for a more than 2% move in the stock above the breakeven price of $100.32 by the end of the week.

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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