Stock Options Watch: INTC, SHW, JRCC

INTC – Intel Corp. – Shares in Intel are trading lower on Thursday, down as much as 3.7% in the early going to $23.25, after the world’s largest maker of semiconductors reported lower than expected second-quarter earnings and sales and said third-quarter revenue may come in lower than analyst estimates. Options on INTC are changing hands at a clip today, with volume approaching 115,000 contracts as of 11:45 a.m. ET versus average daily volume of around 128,000 contracts. Trading in Intel puts is outpacing that of calls, with the put/call ratio hovering near 1.7 as of the time of this writing. Fresh interest in October expiry put options today suggests one trader is bracing for the price of the underlying to potentially drop substantially during the next few months. More than 15,000 put options traded at the Oct $20 strike during the first hour of the trading session versus open interest of 9,296 contracts. The put options appear to have been purchased for an average premium of $0.26 apiece. The bearish position makes money at expiration should shares in Intel plunge 15% from the current price of $23.30 to breach the average breakeven point on the downside at $19.74. Shares in Intel last traded below $19.74 in December.

SHW – Sherwin-Williams Co. – Options are more active than usual on paint retailer Sherwin-Williams Co. today with shares in the name down more than 10% to $163.63 at the open after the company reported lower than expected second-quarter earnings prior to the opening bell and after antitrust regulators in Mexico voted to block the company’s takeover of Mexico City-based, Consorcio Comex SA de CV. Shares in Sherwin-Williams dipped to the lowest level since April at the start of the session, but some options traders appear to be positioning for the price of the underlying to pare some of those losses by the end of this week. Contrarian trades cropped up at the Jul $170 and $175 strikes, with a couple hundred calls purchased at each strike this morning for average premiums of $1.90 and $0.81 apiece, respectively. Upside call buyers may profit if shares in Sherwin-Williams rebound ahead of expiration this week. The stock is off its lowest level of the session, but is still down 8.0% on the day at $168.31 in early afternoon trading. Overall options volume on the stock is nearing 9,000 contracts as of 12:20 p.m. ET versus the stock’s average daily volume of around 2,850 contracts.

JRCC – James River Coal Co. – Shares in U.S. coal producer, James River Coal Co., are up sharply on Thursday morning, but trading traffic in August expiry put options on the stock during the first hour of the session suggest one trader is prepared for shares to potentially hit fresh lows in the near term. JRCC shares increased as much as 16% this morning to $2.14, the highest level since the end of June. It looks like one trader snapped up more than 1,200 puts at the Aug $1.5 strike for a premium of $0.10 apiece. The bearish options make money at expiration next month in the event that James River Coal’s shares drop 35% from today’s high of $2.16 to breach the effective breakeven point on the downside at $1.40. The coal producer’s shares dipped as low as $1.46 as recently as April 2nd, and are down more than 35% since the start of 2013. The company reports second quarter earnings in August.

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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