Options Activity Alert: KMX, AA, MCO

KMX – CarMax, Inc. – Shares in used vehicle retailer, CarMax, Inc., jumped 13% this morning to $33.00 on positive comments regarding revenue growth and same-store sales at ITG Research. The stock is off its earlier highs this afternoon, trading up 9.3% on the day at $31.90 as of 12:40 p.m. ET. Options traders flocked to CarMax options straight out of the gate this morning, snapping up calls across several expiries to position for further upside in the price of the underlying. Near-term bullish positioning in the front month options is heaviest at the Oct. $32 strike, where around 1,200 calls were purchased for an average premium of $0.50 apiece. Traders long the $32 calls stand ready to profit at October expiration in the event that KMX shares add 1.9% to the current price of $31.90 to exceed the average breakeven point at $32.50. Upside calls expiring November 16th attracted fresh interest, as well. Options traders picked up around 700 of the Nov. $33 strike call at an average premium of $0.92 each and purchased some 480 calls at the Nov. $34 strike for an average premium of $0.60 apiece. Call buyers that may see profits in the event that KMX shares soar to a new 52-week high by November expiration, bought more than 300 calls at the Nov. $35 strike for an average premium of $0.39 per contract. Buyers of the $35 strike call start making money if CarMax’s shares surge 11% over the current price of $31.90 to top $35.39 by expiration next month.

AA – Alcoa, Inc. – All eyes will be on aluminum producer, Alcoa, Inc., on Tuesday when the company reports third-quarter earnings after the closing bell. Shares in the name are bucking the trend on a down day for the broader market, trading up 0.80% to stand at $9.16 as of 11:50 a.m. in New York. Options volume is heavier than usual leading up to tomorrow’s earnings release, with upwards of 40,000 contracts in play so far versus the stock’s average daily options volume of roughly 30,300 contracts. Call options are slightly more active than puts just before midday, due in part to trading traffic in the Nov. $10 strike call. Traders exchanged nearly 9,000 calls at the Nov. $10 strike this morning against open interest of 1,542 contracts. It looks like most of the call options were purchased for an average premium of $0.13 apiece, thus positioning buyers to profit in the event of a near 11% rally in the price of the underlying to exceed $10.13 by November expiration. Shares in Alcoa last traded above $10.13 back in April.

MCO – Moody’s Corp. – A burst of put buying on ratings agency, Moody’s Corp., pushed the stock onto our ‘hot by options volume’ market scanner this morning. Shares in the name are currently down 0.90% to stand at $44.51 as of 12:00 p.m. ET. One or more options strategists appear to be betting on further declines in the price of the underlying in the near term. Put buyers may be securing downside protection to hedge long stock in the name, or could be establishing outright bearish positions on Moody’s ahead of the company’s third-quarter earnings report on October 26th. Traders focused in on the Nov. $44 strike put, trading 5,000 of the contracts this morning against previously existing open interest of 18 contracts. Most of the puts appear to have been purchased for an average premium of $1.55 apiece. The bearish options make money if shares in Moody’s Corp. slip 4.6% to breach the average breakeven point on the downside at $42.45 by expiration next month.

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.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.


*