Option Activity Alert: TJX, TIVO, BP

TJX – TJX Companies, Inc. – Near-term bullish options traders are betting on a rebound in shares of the operator of the largest off-price retail chains, T.J. Maxx and Marshalls, by picking up call options in the January contract this afternoon. Shares in TJX Companies fell 1.30% in the final hour of the session to $43.01, recovering off an earlier intraday low of $42.55. TJX shares are down 4.0% since December 30, and have lost a total of 8.9% since November 5, 2010, when shares touched a 6-month high of $47.21. Investors positioning for a rally in TJX Companies are perhaps hopeful shares will rebound following the release of December same-store sales data. Optimistic traders scooped up more than 2,600 calls at the January $44 strike for an average premium of $0.49 apiece. Call buyers at this strike stand ready to accrue profits should shares rise 3.4% to exceed the average breakeven price of $44.49 ahead of January expiration. Bullish sentiment spread to the higher January $45 strike where nearly 1,000 call options were purchased at an average premium of $0.24 a-pop. Higher-strike call buyers make money if TJX shares rally 5.2% to trade above the average breakeven point at $45.24 before the contracts expire in a couple of weeks.

TIVO – TiVo, Inc. – Massive prints in deep out-of-the-money call options on TiVo today appear to be the work of outright bullish players speculating that shares in the television technology firm could more than double by May expiration. Shares in TiVo are up sharply by 8.07% this afternoon to stand at $9.78 as of 2:40pm in New York. TiVo, Inc. is participating in the Citi 21st Annual Global Entertainment, Media and Telecommunications Conference today. Investors hoping to see TiVo’s shares rebound to prices not seen since April of 2010 purchased debit call spreads during the first half of the trading session. Approximately 20,000 calls were picked up at the May $17.5 strike for an average premium of $0.66 each, marked against the sale of about the same number of calls up at the May $20 strike at an average premium of $0.34 apiece. The average net cost of buying the spread amounts to $0.32 per contract. Call spreaders are poised to profit should shares in TiVo surge 82.2% over the current price of $9.78 to surpass the average breakeven point to the upside at $17.82 by May expiration day. Maximum potential profits of $2.18 per contract are available to TIVO-bulls in the event that the price shares jump 104.5% to exceed $20.00 before the contracts expire in five months time. Options implied volatility on stock is up 14.5% at 85.06% in the final 45 minutes of the trading session.

BP – BP PLC – The purchase of a large chunk of deep out-of-the-money put options on BP this afternoon appears to be the work of an investor taking profits off the table. Shares of the oil company are up 0.75% at $46.60 heading into the close. Approximately 16,000 puts were purchased at the April $35 strike today for a premium of $0.27 each. Put open interest of 18,404 contracts at this strike is sufficient to cover volume generated during the session. Upon examination, it looks like the majority of the open interest was created back on December 2 and December 6, 2010. On each of these dates, a chunk of roughly 8,000 puts changed hands at the April $35 strike at premiums that average out to $0.83 per contract. The put contracts traded to the middle of the market, thus making it difficult to determine whether they were bought or sold. However, the purchase of 16,000 of the puts today suggests those contracts were likely sold back in December. Buying-to-close the short stance in put options results in average net profits of $0.56 in premium per contract. In keeping with the assumption that this transaction is a closing purchase, the reading of put open interest at the April $35 strike should collapse down to around 2,000 lots overnight.

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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