Stock Options Watch: TGT, ONNN, CVS

TGT – Target Corp. – Weekly call buyers homed in on Target Corp. options during morning trading on Tuesday, a sign some traders are positioning for shares in the name to extend gains in the near term. The stock is trading up 1.7% at $72.23 just before midday in New York, after earlier rallying as much as 2.4% to a new all-time high of $72.77. Target’s shares have gained more than 25% since this time last year. The most active weekly contracts in play on TGT during the first half of the session are the Jun 07 ’13 $72.5 strike calls, with upwards of 1,800 contracts in play versus open interest of 640 contracts. It looks like most of the calls were purchased near the open for an average premium of $0.40 each, thus positioning buyers to profit at expiration in the event that shares settle above the average breakeven price of $72.90. Time and sales data indicates that the $72.5 weekly calls attracted buyers yesterday as well. On Monday around 600 of the $72.5 calls appear to have been purchased for an average premium of $0.11 apiece. Traders paying $0.11 per contract yesterday are seeing sizable overnight gains, with premium on the call options currently up four-fold at $0.48 each as of 12:10 p.m. ET.

ONNN – ON Semiconductor Corp. – Shares in ON Semiconductor rose 2.8% to a new 52-week high of $8.73 on Tuesday morning, extending the more than 30% upside move in the price of the underlying since this time last year. Options changing hands on ONNN in the early going today suggests at least one trader is positioning for shares to falter during the next four months. The buyer of roughly 900 puts at the Oct $7.0 strike for a premium of $0.25 apiece during the first 15 minutes of the session may be securing downside protection to hedge a position in the underlying shares, or may be initiating an outright bearish stance on ONNN through October expiration. A naked long position in the $7.0 strike puts makes money at expiration should shares in the Phoenix, Arizona-based company tumble 23% from today’s high of $8.73 to breach the effective breakeven point on the downside at $6.75. ON Semiconductor is scheduled to present at the Bank of America Merrill Lynch Global Technology Conference in San Francisco this afternoon.

CVS – CVS Caremark Corp. – Pharmacy services provider, CVS Caremark Corp., popped up on our market scanners on Tuesday on heavier than usual trading traffic in front month calls. Shares in the name are trading lower this afternoon, down 1.65% at $57.68 as of 12:15 p.m. ET, but some traders appear to be positioning for the price of the underlying to hit fresh 52-week highs in the near term. The most active June expiry contracts changing hands today are the $62.5 calls, with more than 3,000 lots in play versus open interest of 1,424 contracts. It looks like most of the upside calls were purchased for a premium of $0.10 each early in the trading session. The contracts make money at expiration if shares in CVS surge 8.5% over the current price of $57.68 to top the breakeven price of $62.60. CVS is scheduled to present at William Blair & Company’s Growth Stock Conference next Wednesday.

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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