RSH – RadioShack Corp. – Options traders are enacting diverse bearish strategies on the retailer of consumer electronics goods with shares of the underlying stock plunging as much as 10.95% this morning to touch down as an intraday low of $19.11. RSH shares are currently down a lesser 6.90% to stand at $19.98 as of 11:20 am (ET). RadioShack’s shares fell sharply on news private-equity firms, such as TPG Capital and Blackstone Group LP, are losing interest in making a bid for the retailer. One bearish individual, who appears to have purchased 10,000 puts yesterday, was well positioned to benefit from the downward shift in share price. It looks like the trader picked up 10,000 puts at the August $21 strike on Monday for a premium of $1.15 per contract. Today the investor sold all 10,000 puts for premium of $2.15 each, pocketing net profits of $1.00 per contract. The same bearish strategist indicated RadioShack’s shares could continue to fall ahead of August expiration by purchasing 10,000 fresh puts at the August $19 strike for a premium of $1.15 apiece. The investor makes money on the new put stance if RSH shares decline another 10.7% from the current price of $19.98 to breach the effective breakeven point on the puts at $17.85 by expiration day next month. Another pessimistic player established a ratio put spread in the September contract, buying 1,000 now in-the-money puts at the September $20 strike for premium of $2.00 each, and selling 2,000 puts at the lower September $18 strike for an average premium of $1.05 a-pop. The investor responsible for the ratio spread pockets a net credit of $0.10 per contract. Maximum potential profits of $2.10 per contract are available to the trader if RadioShack’s shares fall another 9.90% to settle at $18.00 at expiration. Finally, bears shed 3,400 calls at the August $22 strike price to take in an average premium of $0.46 apiece. The overall reading of options implied volatility on RSH increased 4.9% to 58.68% by 11:35 am (ET).
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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