Option Activity Alert: MCK, SWY, EXM, CVLT

MCK – McKesson Corp. – Bulls are buying up call options on the drug and medical supplies distribution company today ahead of the firm’s third-quarter earnings report after the final bell. Shares in McKesson are currently up 0.50% to stand at $74.52 as of 12:25pm in New York. More than 5,800 calls have changed hands at the February $75 strike on paltry previously existing open interest of just 819 contracts at that strike. Investors taking bullish positions on McKesson ahead of earnings purchased more than 5,000 of the calls for an average premium of $1.45 per contract. Call buyers stand ready to make money should shares in the name rally another 2.6% to surpass the average breakeven price of $76.45 by February expiration. McKesson Corp.’s shares, which rallied up to $75.49 last week, have not traded this high since 1999. Options implied volatility on McKesson is up 13% at 26.23% in early afternoon trade ahead of earnings this evening.

SWY – Safeway Inc. – Activity in near-term put options on the food and drug retailer today suggests some investors expect shares in Safeway to rebound ahead of February expiration. Shares are up 1.25% at $20.77 just before 12:45pm in New York, but are down roughly 13.45% since November 5, 2010. Safeway will reveal its performance for the fourth quarter before the opening bell tolls on February 24, 2011. Bullish players appear to have sold the majority of the 18,500 puts that have changed hands at the February $20 strike on open interest of 1,595 contracts for an average premium of $0.20 each. Put sellers keep the full premium received on the sale as long as shares in Safeway exceed $20.00 through expiration day next month. More than 3,750 in-the-money put options changed hands at the higher February $23 strike on previously existing open interest of just 6 contracts. It looks like nearly 2,000 of the put options sold for an average premium of $2.57 a-pop. Investors selling the puts may walk away with the full amount of premium pocketed on the transaction if shares in Safeway surge 10.7% to trade above $23.00 ahead of expiration day. But, it appears traders short the put options are willing to have shares of the underlying put to them at an effective price of $20.43 each in the event that the contracts remain in-the-money and are exercised at expiration.

EXM – Excel Maritime Carriers, Ltd. – Investors bulked up on March contract put options on the provider of transportation services for dry bulk cargo this morning with shares in Excel Maritime Carriers trading 0.65% lower on the session at $4.64 as of 11:30am in New York. Shares in Excel Maritime have fallen 30.0% since November 11, 2010, but it looks like options traders are betting the stock could extend losses ahead of its fourth-quarter earnings report, which is scheduled for release after the market closes on February 23, 2011. Nearly two years ago, the shipping firm’s shares traded as low as $3.00 on March 9, 2009, but in the three following months rallied up to as high as $11.70 by June 2, 2009. Bearish players expecting Excel’s shares to head lower in the next couple of months picked up more than 3,000 puts at the March $4.0 strike, on open interest of just 227 contracts, for an average premium of $0.15 each. Put buyers start to make money if the cargo carrier’s shares plunge 17.0% from the current price of $4.64 to breach the effective breakeven point on the downside at $3.85 ahead of March expiration. Options implied volatility on the stock is up 15.6% to stand at 51.65% this morning.

CVLT – CommVault Systems, Inc. – Call options on the provider of data and information management software applications and services are active this morning with shares in CommVault Systems rising as much as 2.4% to an intraday high of $30.62. Investors are likely taking bullish stances on the stock ahead of the release of the third-quarter earnings report before the market opens for trading tomorrow morning. Options traders exchanged 2,200 in-the-money calls at the February $30 strike on open interest of 886 contracts. It looks like the majority of the options were purchased for an average premium of $1.51 apiece. Investors long the calls are poised to profit in the event that CommVault’s shares rally another 2.9% over today’s high of $30.62 to exceed the average breakeven price of $31.51 by February expiration day. CommVault Systems last traded above $31.51 back on December 10, 2010, when the stock reached a 52-week high of $31.87. Bullish players also picked up more than 330 calls at the higher February $32 strike for an average premium of $0.94 each. The overall reading of options implied volatility on CVLT is up 5.5% at 50.85% ahead of earnings tomorrow. More than 3,700 contracts have changed hands on CommVault this morning on overall existing open interest of 5,982 lots.

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.

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.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.