Stock Options Watch: WBMD, ZQK, IP

WBMD – WebMD Health Corp. – Shares in health information services provider, WebMD Health Corp., are on a tear today, up as much as 31% at a new 52-week high of $35.28 during morning trading after the company raised its full year profit and revenue forecast. The stock has increased more than 160% since November of 2012 when the shares touched down at an all-time low of $13.13. Options traders who picked up far out of the money call options on WBMD during recent weeks are enjoying big gains in the value of their positions today amid double-digit percentage gains in the price of the underlying. Of note, was the purchase of around 350 of the Jul $35 strike calls at a premium of $0.20 apiece back on June 6th when shares in the name were hovering around $29.50. The $35 strike calls are currently changing hands at four times that amount, with the last-traded price at $0.80 per contract as of 11:45 a.m. in New York. Traders initiating bullish positions on the stock last week appear to have purchased around 220 calls at the Aug $35 strike for a premium of $0.40 per contract on Monday morning. The rally in shares today has lifted premium on the Aug $35 call options to $2.25 as of the time of this writing. Finally, traders positioning for the price of the underlying to continue higher next week appear to have purchased around 850 of the Jul $35 strike calls this morning for an average premium of $0.95 apiece. These contracts make money at expiration next week as long as shares in WebMD rally another 5.0% over the current price of $34.25 to exceed the average breakeven point at $35.95. WebMD Health Corp. is scheduled to report second-quarter earnings after the closing bell on July 31st.

ZQK – Quiksilver, Inc. – Apparel and accessory company, Quiksilver, popped up on our ‘hot by options volume’ market scanner in the early going on Friday due to heavy trading in January 2014 expiry options. The stock is down 2.0% on the session at $6.93 as of midday on the East Coast. Sizable prints in Jan 2014 $6.0 strike puts today suggests at least one options player is bracing for shares in the name to extend declines during the back half of 2013. It looks like roughly 11,500 of the $6.0 strike puts were purchased during morning trading for an average premium of $0.50 apiece. The bearish position makes money at expiration next year in the event that Quiksilver’s shares drop 20% from the current level to trade below the average breakeven price of $5.50. Shares in ZQK last traded below $5.50 in January. With the stock up roughly 220% since this time last year, the $6.0 put buyer could be looking to protect the value of a long position in the underlying shares, or taking an outright bearish stance on the stock during the next six months. The Jan 2014 $5.0 strike puts are also changing hands today, with around 1,000 of the contracts purchased during the first hour of trading for a premium of $0.20 each.

IP – International Paper Co. – Options activity on International Paper this morning suggests one or more traders are preparing for shares in the name to potentially decline next week. The stock is currently flat on the session at $47.56 as of 12:15 p.m. ET, erasing mild losses of around 0.30% near the open. IP’s shares have increased more than 12% since touching down to a four-month low of $42.36 on June 24th. The most actively traded contracts on IP as measured by volume are the Jul $48 strike options, with around 2,200 in the money puts in play versus open interest of 566 contracts. It looks like much of the volume was purchased for an average premium of $0.95 per contract. The position makes money should the stock decline 1.1% from the current price of $47.56 to breach the average breakeven point on the downside at $47.05 at expiration next 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.

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