Stock Options Watch: CZR, SD, LUV

By Feb 8, 2013, 2:01 PM Author's Blog  

CZR – Caesars Entertainment Corp. – Shares in the casino entertainment company are soaring on Friday, up nearly 30% at $12.88as of 11:40 a.m. in New York trading, on reports that Las Vegas strip casino gambling revenue rose 13.49% in December. The operator of Caesars Palace, Harrah’s and other casino brands reports fourth-quarter earnings at the end of February. Options traders who placed bullish bets on the stock ahead of Friday’s big rally are seeing sizable overnight paper profits on their positions. The largest increase in call open interest yesterday was in the Mar. $10 strike call options. Time and sales data from Thursday suggests some 1,300 of the $10 strike calls were purchased yesterday for an average premium of $0.39 apiece. The last traded price on these contracts just prior to midday on the East Coast is $3.30 each, an eight-fold increase in value overnight. Bullish bets on Caesars were also established at the June $10 strike yesterday, with around 260 of those contracts purchased at a premium of $0.80 apiece. Premium to buy the June $10 strike call options today has jumped to $3.90 per contract of 11:55 a.m. ET on Friday. Overall options volume on CZR is upsharply versus the stocks average daily level, with upwards of 8,700 calls and puts in play on the stock compared to average volume of 819 contracts.

SD – SandRidge Energy, Inc. – A sizable bearish options trade initiated on SandRidge Energy this morning looks for shares in the oil and natural gas company to face limited declines during the first half of the 2012. The stock today trades down 1.2% on the session at $5.87 as of 11:30 a.m. ET. SandRidge reports fourth-quarter and full-year 2012 results after the closing bell on February 28th. The largest transaction in SD options today was the purchased of 12,500 in-the-money puts at the June $6.0 strike at a premium of $1.03 apiece, spread against the sale of 25,000 puts at the lower June $5.0 strike at a premium of $0.51 each. The position was put on at a net premium of $0.01 per contract and makes money beneath an effective breakeven price of $5.99. Maximum potential profits of $0.99 per contract are available on the spread should SD shares drop 15% from the current price to settle at $5.00 at June expiration.

LUV – Southwest Airlines Co. – Bullish options are changing hands on Southwest Airlines today, with shares in the name trading up as much as 1.0% to a fresh 52-week highin the early going before reversing gains to trade 0.20% lower on the day at $11.59 as of 11:55 a.m. ET. The most active contracts are the Mar. $12 strike calls, which have traded more than 11,200 times against open interest of 1,404 contracts. Time and sales data suggests the bulk of the volume was purchased for an average premium of $0.20 apiece during the first few minutes of the trading day. Call buyers stand ready to profit at expiration next month should shares in the airline rally 5.3% to exceed the average breakeven price, and new 52-week high, of $12.20. The stock is up more than 11% year-to-date, and has rallied roughly 20% since this time last year.

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