Options Activity Alert: LZB, DD, PRLB

LZB – La-Z-Boy, Inc. – Shares in furniture producer, La-Z-Boy, Inc., increased as much as 3.9% to $19.80 at the start of the session, the highest level since 2004, ahead of the company’s fourth-quarter earnings report after the closing bell today. Options volume is up ahead of the report, with roughly 400 contracts in play this afternoon versus average daily volume of around 80 contracts. Trading in La-Z-Boy call options is outpacing puts, with the call/put ratio up above 4.3 as of the time of this writing. Some traders appear to be positioning for shares in LZB to rally post-earnings, purchasing out-of-the-money call options expiring in June and July. Front month call buyers looked to the Jun $22.5 strike, purchasing around 50 lots at an average premium of $0.14 each, and the $25 strike calls, picking up 40 contracts at an average premium of $0.18 apiece. The Jun $20 strike calls attracted volume during Monday’s session, as well. Time and sales data suggests one trader likely purchased 100 of the $20 calls for a premium of $0.55 apiece yesterday morning. The bullish bet pays off at expiration as long as shares in LZB settle above the effective breakeven price of $20.55.

DD – E.I. du Pont de Nemours & Co. – Call options changing hands on DuPont in the early going on Tuesday suggest one trader is positioning for shares in the name to potentially rise to the highest level since 2000 during the next seven months. Shares in DuPont are up 0.20% on the session at $53.80 just before midday in New York. It looks like the strategist purchased a roughly 2,600-lot Jan 2014 $57.5/$62.5 call spread for an average net premium of $1.07 per contract. The bullish position starts making money if shares in DuPont rally 9.0% over the current price of $53.80 to exceed the average breakeven point at $58.57, with maximum potential profits of $3.93 per contract available on the spread should shares surge 16% to $62.50 by January expiration.

PRLB – Proto Labs, Inc. – Options on the manufacturer of custom parts for prototyping and short-run production are more active than usual today, with volume rising to 1,850 contracts by 1:00 p.m. ET, versus the stock’s average daily volume of around 380 contracts. The bulk of the volume is in June and July expiry call options as some traders look to place near-term bullish bets on the stock. Shares in Proto Labs rallied more than 6.8% during the first half of the trading session to a fresh record high of $63.50. Bullish bets on PRLB appear to be accumulating at the Jun $65 strike, with upwards of 500 calls traded versus open interest of 136 contracts. It looks like most of the volume was purchased for an average premium of $0.25 apiece, preparing call buyers to profit should shares in PRLB increase 2.8% over today’s high of $63.50 to exceed the average breakeven point at $65.25 by expiration this week. The Jul $65 strike calls are also active, with roughly 350 lots in play against open interest of 186 contracts. Yesterday, analysts at Jefferies raised their target share price on the ‘Overweight’ rated stock to $65.00 from $58.00. Shares in Proto Labs are up 80% since this time last year.

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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