Options Activity Alert: VRTX, ZQK, JPM

VRTX – Vertex Pharmaceuticals, Inc. – A sizable bullish position initiated in Vertex options this morning looks for shares in the drug maker to regain some of the steep losses realized during the past two months. Shares in Vertex Pharmaceuticals are trading flat on the session at $39.10 as of 11:20 a.m. ET, but have dropped 35% since the second week in October. One options trader who appears to have purchased a 3,500-lot April $42/$55 call spread for a net premium of $2.66 per contract stands ready to profit from a strong rebound in Vertex shares through expiration. The spread starts making money if shares increase 14% over the current price of $39.10 to surpass the effective breakeven point at $44.66, with maximum potential profits of $10.34 per contract available in the event shares jump 41% to hit $55.00 by expiration in April.

ZQK – Quiksilver, Inc. – Options on apparel and accessories retailer, Quiksilver, Inc., are more active than usual on Friday ahead of the company’s fourth-quarter earnings report next week. Shares in the maker of casual wear under its Quiksilver, Roxy and DC brands are trading up 2% today at $4.09 as of midday on the East Coast. Traders exchanged more than 7,500 option contracts on ZQK during the first half of the session, sizable volume versus the stock’s average daily options volume of around 1,300 contracts. The Dec. $5.0 strike calls are seeing the heaviest trading traffic, with more than 4,200 lots in play against zero open positions. It looks like most of these calls were purchased for an average premium of $0.05 apiece, perhaps by one or more strategists expecting the price of the underlying to pop after earnings. The stock posted double-digit percentage gains following the release of third-quarter earnings in September and after the second-quarter earnings report in April of this year. Buyers of the $5.0 strike front month call options on ZQK this morning may profit at expiration should shares in the name rally nearly 25% to top the breakeven price of $5.05. The stock yesterday was rated new ‘neutral’ with a share price target of $4.00 at Goldman Sachs.

JPM – JPMorgan Chase & Co. – Weekly call buying on JPMorgan in the first hour of the trading session suggests some traders anticipate shares in the name will extend gains in the near term. Shares in JPM are up better than 2% at present to trade at $42.35 as of 11:35 a.m. ET. The stock has increased roughly 30% during the past six months. Call options with five full trading sessions remaining to expiration were most active at the Dec. 14 ’12 $42.5 strike in the early going, with 2,800 contracts in play versus open interest of 94 positions. Time and sales data indicates the bulk of the $42.5 strike weekly calls were purchased for an average premium of $0.35 apiece. Call buyers may profit at expiration next week should shares in JPM rally another 1.2% to exceed the average breakeven price of $42.85. Shares in JPM last traded above $42.85 in the first full week of November.

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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