Stock Options Watch: EAT, FDX, DWA

EAT – Brinker International, Inc. – Shares in the operator of Chili’s and Maggiano’s restaurants are on the rise, up 1.7% at $42.25, ahead of the company’s first-quarter earnings report prior to the opening bell tomorrow. The stock is up more than 30% since the start of the year, but one options trader is bracing for the price of the underlying to potentially pull back after earnings.

The most traded options contracts on Brinker International this morning are the Nov $40 strike puts, where one trader appears to have purchased a block of 1,000 puts at a premium of $0.80 each. The position makes money at expiration next month if shares in EAT drop more than 7.0% from the current price of $42.25 to breach the effective breakeven point on the downside at $39.20. The put buyer may be securing downside protection to hedge a long position in the underlying shares, or may be initiating an outright bearish bet on the stock ahead of the earnings release.

FDX – FedEx Corp – Shares in shipping solutions provider FedEx Corporation are up strongly on Tuesday, gaining 3.0% to $131.23 during morning trading after the stock was upgraded to ‘Overweight’ from ‘Neutral’ with a target share price increase to $153.00 from $134.00 at J.P. Morgan.

Trading traffic in weekly calls on FDX indicates some options players are positioning for the price of the underlying to extend gains during the next few sessions. The most-traded weekly calls are the Oct 25 ’13 $130 strike contracts, with roughly 950 lots purchased in the early going for an average premium of $1.68 each. The bullish position may be profitable at expiration this week if shares in FedEx exceed the average breakeven price of $131.68. Intraday gains in the price of the underlying since the call options were purchased have lifted premium required to buy the $130 calls, with the last-traded price on the options up at $2.12 as of the time of this writing.

DWA – Dreamworks Animation SKG, Inc. – Animated feature film producer Dreamworks Animation popped up on our ‘hot by options volume’ market scanner on Tuesday morning due to heavier than usual trading in November expiry calls.

Trading in the Nov $30 calls suggests at least one strategist may be positioning for the price of the underlying to hit fresh 52-week highs after the company’s third-quarter earnings report after the closing bell next Tuesday. Roughly 1,900 of the Nov $30 calls have changed hands so far today, which is more than three times previously existing open interest in the $30 calls of 489 contracts. Time and sales data indicates most of the calls were purchased during the first five minutes of the session at a premium of $1.00 each. Call buyers stand ready to profit at expiration next month in the event that Dreamworks Animation’s shares rally 6.6% to exceed the breakeven price of $31.00.

Shares in DWA are currently up 0.45% on the session at $29.07 as of 10:45 a.m. ET.

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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