Option Activity Alert: IMAX, AMZN, HAL, MU

IMAX – IMAX Corp. – Call options on the entertainment technology company are in demand this morning after shares in IMAX jumped 9.1% roughly 40 minutes into the trading session to an intraday high of $17.63. The sizable move in the price of the underlying coupled with increased trading in IMAX options lifted the stock’s reading of implied volatility 10.3% to 82.95% by 11:05 am ET. The sharp rise in shares and volatility are a boon to investors who appear to have purchased September contract calls on the stock on Friday. Open interest in the Sept. $20 strike call suggest some 1,400 contracts were picked up at an average premium of $0.25 apiece during the final trading session last week. Investors long the calls at $0.25 per contract now hold contracts that have more than doubled in value over the weekend. Traders eyeing the Sept. $20 strike calls this morning exchanged more than 3,800 of the options, exceeding the 2,116 previously existing positions at that strike. It looks like investors purchased around 2,700 of the calls this morning for an average premium of $0.40 each. Call buyers profit if shares in IMAX Corp. jump 15.7% over today’s high of $17.63 to surpass the average breakeven price of $20.40 at expiration in a couple of weeks. The September $20 strike call currently commands an asking price of $0.75 per contract as of 11:15 am in New York.

AMZN – Amazon.com, Inc. – Shares in online retail giant Amazon.com gained 2.8% to $204.76 this morning, but call buyers in the front month are positioning for far more substantial gains in the price of the underlying come September expiration. Call options on AMZN are trading roughly 1.7 times for each single put option in action today, with the bias toward calls helped by substantial prints in deep out-of-the-money contracts expiring three weeks from now. Investors exchanged more than 6,100 calls at the September $225 strike against previously existing open interest of 2,000 contracts. It looks like the majority of the calls, roughly 4,400 contracts, were purchased for an average premium of $1.21 a-pop. Call buyers stand prepared to profit should shares in Amazon.com surge 10.5% over the current price of $204.76 to surpass the average breakeven point at $226.21 by September expiration day. Amazon’s shares last exceeded $226.21 back on August 1 when the stock soared to a record high of $227.45.

HAL – Halliburton Co. – Put activity on the Houston, Texas-based provider of oil equipment and services suggests at least one options strategist is prepared in the event of a sharp pullback in Halliburton’s shares by September expiration day. Shares in HAL rose along with crude oil and U.S. equities following the U.S. Commerce Department’s report that showed purchases rose the most since February last month. Halliburton’s shares are up 1.7% at $42.17 in early-afternoon trade. Traders positioning for shares in HAL to potentially pull back substantially in the next few weeks purchased around 4,300 puts at the September $36 strike for an average premium of $0.46 apiece. Put buyers profit if shares in the oil services provider plunge 15.7% to breach the average breakeven price of $35.54 by September expiration. Shares in Halliburton reached a six-month low of $36.79 last Tuesday, on the heels of a more than 36.0% correction since its July 25th 52-week high of $57.77. Investors long the September $36 strike puts profit at expiration if HAL’s shares breach last week’s low of $36.79 to trade at levels not seen since November 2010. Halliburton is scheduled to present at the 2011 Barclays Capital CEO Energy-Power Conference next Tuesday.

MU – Micron Technology, Inc. – Traders snapping up September $7.0 strike call options on Micron Technology ahead of the weekend found the value of their options had nearly doubled when the market opened higher on Monday. Shares in the manufacturer of DRAM and NAND Flash memory products increased as much as 7.4% at the start of the session to an intraday high of $6.08. Open interest patterns in the Sept. $7.0 strike call suggest traders purchased around 8,700 contracts at that strike for an average premium of $0.15 apiece on Friday. The calls today traded for as much as $0.32 apiece at the open when Micron’s shares were up at their highest of the session. Investors populating the Sept. $7.0 strike call sold 4,800 of the contracts straight out of the gate this morning for an average premium of $0.29 each, while another 2,100 calls traded to the middle of the market. Traders selling the options may have been taking profits off the table, or alternatively, may have sold the contracts outright to pocket available premium in the expectation that shares are likely to trade below $7.00 through September expiration day. In either case, the transaction appears to have been well timed as premium on the call options are off their highest levels of 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.

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