Stock Options Watch: PSX, DKS, IYT

PSX – Phillips 66 Company – Shares in Phillips 66 are trading lower today, down 2.0% at $57.70 as of 10:55 a.m. ET. Options changing hands on the operator of refineries indicates some traders are bracing for the price of the underlying to extend losses this week. The most actively traded contracts on Phillips 66 as measured by volume are the Jul 05 ’13 $57.5 strike puts, with volume in excess of 5,400 contracts at present versus open interest of 2,436 contracts. It looks like traders purchased most of the volume for an average premium of $0.43 apiece this morning. Put buyers may profit at expiration at the end of a shortened U.S. trading week should shares in Phillips decline another 1.1% to settle below the average breakeven price of $57.07. Traders appear to be snapping up the $57.5 strike weekly puts for a second consecutive session given the roughly 2,300-lot overnight increase in put open interest at that strike. Time and sales data suggests most of the puts were purchased for an average premium of $0.35 each on Monday. Shares in Phillips 66, up 70% since this time last year, have declined roughly 18% off a record high of $70.52 reached back in March.

DKS – Dick’s Sporting Goods, Inc. – Options on Dick’s Sporting Goods are more active than usual today, with much of the trading traffic concentrated in August expiry puts. More than 10,400 of the Aug $45 strike puts have changed hands as of 11:50 a.m. ET versus open interest of 15 contracts. Shares in DKS are currently down 0.50% on the day at $49.75. Trading in the bearish options on DKS this morning is pushing up the premium required to purchase the contracts. Roughly 650 of the $45 puts were purchased at a premium of $0.45 each just before 11:15 a.m. ET; roughly five minutes later, another 1,000 lots were picked up at a premium of $0.50 apiece. The current price tag on the $45 puts is now up at $0.65 per contract, a roughly 45% increase during the past 45 minutes. The bearish options look for shares in Dick’s to potentially drop 10% during the next six weeks to expiration. Shares in DKS last traded below the striking price of $45.00 back in December of 2012.

IYT – iShares Dow Jones Transportation Average Index Fund – Fresh interest in put options on the IYT looks for the price of the underlying to decline during the next six weeks. Shares in the iShares Dow Jones Transportation Average Index Fund are off slightly today, down 0.10% at $111.13 as of 11:15 a.m. in New York. Shares in the IYT, up some 18% since the end of 2012, are down roughly 5.0% since touching a record high of $117.30 in May. The Aug $109 strike puts are the most actively traded contracts on the IYT thus far in the session, with roughly 9,500 lots in play versus open interest of 92 contracts. Time and sales data suggests much of the volume was purchased in the early going for an average premium of $2.39 apiece. The contracts start making money if shares in the fund decline more than 4.0% from the current level of $111.13 to breach the average breakeven price on the downside at $106.62 by expiration. Shares in the IYT dipped below $106.62 as recently as last Monday, June 24th, when the price of the underlying touched the lowest level since April.

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.

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