Option Activity Alert: PNC, CEDC, SPLS, GILD

PNC – PNC Financial Services Group, Inc. – Shares in the financial services firm are down 1.00% at $60.34 in early-afternoon trade, but activity in May contract call and put options suggests one strategist sees shares in PNC rising sharply in the next few months. The three-legged bullish player appears to have sold 5,000 puts at the May $55 strike for a premium of 1.39 each, purchased the same number of calls at the May $62.5 strike for a premium of $2.15 per contract, and shed 5,000 calls up at the May $67.5 strike at a premium of $0.68 a-pop. The options trader paid a net premium of $0.08 per contract for the transaction, and stands ready to profit should PNC’s shares reverse course and rally 3.7% over the current price of $60.34 to exceed the average breakeven price of $62.58 by expiration day in May. The investor responsible for the trade could accumulate maximum potential profits of $4.92 per contract if the firm’s shares jump 11.9% to trade above $67.50 before the options expire. PNC’s shares last traded above $67.50 back in May 2010. The financial services provider reports first-quarter earnings before the opening bell on April 21, 2011.

CEDC – Central European Distribution Corp. – Near-term options activity on the vodka producer this morning suggests some investors expect the pain of Central European Distribution Corp.’s post-earnings hangover to stick around through March expiration. Shares in CEDC lost 11.2% today to trade at $12.38, the lowest recorded price for the stock since April 2009. The alcohol beverage provider’s shares dropped 45.8% during the trading week, from a closing price of $22.85 on Monday, to today’s low of $12.38. Put buyers in the March contract, however, do not seem to think CEDC has hit rock bottom just yet. Bearish players picked up more than 2,400 puts at the March $12.5 strike for an average premium of $0.59 per contract. Traders long the puts are poised to profit should shares in CEDC fall another 3.8% from today’s low of $12.38 to breach the average breakeven point on the downside at $11.91 by March expiration. Pessimism spread to the lower March $10 strike where some 1,600 put options were purchased for an average premium of $0.18 apiece. Put buyers at this strike make money in the event that the vodka maker’s shares plunge 20.7% to trade below the average breakeven price of $9.82 at expiration day. Options implied volatility on Central European Distribution Corp. shot up 29.7% to 75.55% by 11:20am in New York.

SPLS – Staples, Inc. – A number of sizable options trades popped up on the office supplies retailer this week ahead of, and following, the firm’s fourth-quarter earnings report this past Wednesday. Shares in SPLS are currently down 2.95% to arrive at $20.43 just before 11:55am, but large-volume options trades initiated on the stock this morning appear to be the work of one or more bullish investors positioning for a substantial rally in the price of the underlying through September expiration. A total of 10,000 puts sold for an average premium of $0.975 each at the September $19 strike, while 10,000 calls were purchased up at the September $22 strike at an average premium of $1.075 apiece. The average net cost of the bullish plays amount to just $0.10 per contract. Thus, investors employing the strategy stand prepared to profit in the event that shares in the office supplies firm surge 8.2% over the current price of $20.43 to trade above the average breakeven point to the upside at $22.10 ahead of September expiration.

GILD – Gilead Sciences, Inc. – Investors piled into April contract call options on the biotechnology firm this morning to position for shares in Gilead Sciences to rise ahead of expiration next month. Shares in GILD are up 2.75% at $41.09 as of 11:25am. Bulls may be reacting to a number of positive calls on the stock by analysts at various firms this week, as well as to reports that GILD received FDA approval to remove a warning regarding the risk of possible liver injury from the label of its drug, Letairis. Investors expecting shares to climb higher purchased more than 6,370 calls at the April $42 strike for an average premium of $0.58 each. Call buyers are prepared to make money should the price of the underlying stock rally another 3.6% to surpass the average breakeven price of $42.58 by April expiration day. More than 9,985 calls changed hands at the April $42 strike in the first half of the trading session on previously existing open interest of just 359 contracts. Traders are heavily favoring calls over puts today, with more than 10 call options traded on the stock for each single put option in play on GILD thus far in the session.

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.