Stock Options Watch: AY, SWK, VMW

PAY – VeriFone Systems, Inc. – Shares in electronic payment systems and services provider, VeriFone, are getting slammed on Thursday after the company yesterday forecast third-quarter revenue and earnings well below average analyst estimates. The stock dropped nearly 20% today to $17.70, the lowest level since May of 2010. Shares are currently down 18% on the day at $18.00 as of 11:45 a.m. ET. Traders positioning for shares in VeriFone Systems to extend losses in the near term picked up June and July expiry put options this morning. Put buying at the Jun $16 and $17 strikes position traders to profit from further selling pressure in the shares ahead of expiration in two weeks. It looks like bears purchased around 200 of the Jun $16 strike puts for an average premium of $0.16 each and around 350 of the Jun $17 strike puts at an average premium of $0.37 apiece. Meanwhile, sizable volume in the July expiry puts appears to be the work of one or more traders taking profits and initiating fresh bearish positions on the stock. More than 2,000 puts changed hands at the Jul $23 strike against open interest of 4,106 contracts in the early going this morning. Open interest in the $23 puts increased during the first half of this week, with around 2,500 lots purchased on Monday and Tuesday for an average premium of $1.63 each, according to time and sales data. The sharp drop in the price of the underlying overnight now finds the deep in the money put options changing hands at $4.90 apiece as of midday in New York. Prints in the $23 puts within 10 minutes of the opening bell today indicates traders sold more than 1,400 of the puts for an average premium of $4.55 apiece. Finally, bears anticipating continued weakness in the price of the underlying going forward snapped up 2,000 puts at the Jul $18 strike for an average premium of $1.20 each. Buyers of these contracts stand ready to profit at expiration next month should shares in VeriFone decline another 6.7% from the current level of $18.00 to settle below the breakeven point at $16.80.

SWK – Stanley Black & Decker, Inc. – Power tools maker, Stanley Black & Decker Co., is in rally mode today, up as much as 1.7% to $78.60 in the early going, amid U.S. stock indices poised to potentially record a third consecutive session of declines. Shares in Stanley Black & Decker currently trade down roughly 6.0% off the May 22nd all-time high of $83.26, but options in play on the name indicate one trader is placing a floor on the price of the underlying at current levels. It looks like the strategist sold 1,000 puts at the Oct $77.5 strike for a premium of $4.60 per contract. The put seller walks away with the full amount of premium at expiration as long as shares in SWK settle above $77.50.

VMW – VMWare, Inc. – Shares in VMWare, Inc. rallied sharply today, gaining as much as 7.0% to touch $71.60 after the stock yesterday slumped to a fresh two-year low of $66.46. The stock rose in after-hours trading on Wednesday following comments from the company’s COO at the Bank of America Merrill Lynch 2013 Global Technology Conference. Trading traffic in the weekly options contracts on VMW suggests some traders are locking in gains in the event shares reverse course ahead of the weekend, while other strategists position for the price of the underlying to extend gains. Traders bracing for VMWare’s shares to give up ground snapped up around 1,000 puts at the Jun 07 ’13 $70 strike for an average premium of $0.54 each, and may profit at expiration this week should shares decline 2.0% from the current price of $70.80 to settle below the average breakeven point at $69.46. Conversely, bullish players positioning to profit from additional gains in VMW shares picked up more than 400 calls at the Jun 07 ’13 $72.5 strike for an average premium of $0.34 per contract. Call buyers make money if shares in the name rally another 2.9% to top the breakeven price of $72.84 by the end of the trading 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.

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.