Options Brief: STEC Inc. (STEC)

STEC – STEC, Inc. – An upgrade of the provider of enterprise-class Flash solid-state drives to ‘buy’ from ‘hold’ at ThinkEquity LLC this morning catalyzed a 7.00% rally in the price of STEC’s shares to an intraday high of $15.78. But, it seems the sharp rally was short-lived with the price of the underlying shares currently up just 0.40% to stand at $14.81 as of 12:35 pm (ET). Investors expecting the increase in share price to last earlier purchased July contract call options to position for continued appreciation ahead of expiration on Friday. Bullish players picked up 1,100 calls at the July $15 strike for an average premium of $0.68 apiece, thus positioning buyers to profit should STEC’s shares trade above $15.68 by July expiration day. Optimism spread to the higher July $16 strike where 1,100 calls were purchased at an average premium of $0.23 each. Call buyers at this strike price make money if STEC’s shares surge 9.6% over the current price of $14.81 to trade above the effective breakeven point to the upside at $16.23 by expiration day. Options implied volatility on the stock jumped 11.5% to 72.20% just before 12:45 pm (ET).

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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