Option Activity Alert: TM, ANF, MUR, SNE

TM – Toyota Motor Corp. – A bull call spread on automaker, Toyota Motor Corp., sees the stock potentially rallying nearly 11.0% by October expiration. Shares in the Japanese car company fell 2.4% this morning to $67.70, bringing the stock’s total decline since July 21 up to 20.0%. The bullish spread on Toyota involved the purchase of 2,500 calls at the Sept. $70 strike for a premium of $1.90 each, and the sale of the same number of calls up at the Sept. $75 strike at a premium of $0.49 apiece. Net premium paid to initiate the spread amounts to $1.41 per contract, thus positioning the investor to profit should TM’s shares rise 5.5% over the current price of $67.70 to surpass the effective breakeven point at $71.41 at expiration. The spread prepares the options player to pocket maximum potential profits of $3.59 per contract at expiration in October should shares in the automaker jump 10.8% to trade above $75.00. A third leg of 2,500 calls in play on TM today suggest that the investor responsible for the debit spread may also be adjusting a previously established bullish stance on the stock. The 2,500 calls exchanged at the Sept. $72.5 strike for a premium of $0.13 each may be a closing sale. Open interest in the Sept. $72.5 strike call indicates the same number of contracts were purchased for a premium of $1.81 each back on August 22. Those calls were marked as part of a spread. Perhaps the investor is giving up on the near-term pop required to push those calls in-the-money by next Friday, in favor of the October call spread. Options implied volatility on Toyota rose 7.5% this afternoon to stand at 33.17% by 12:55 pm ET.

ANF – Abercrombie & Fitch Co. – Shares in the teen retailer are bucking the trend today, rising as much as 3.0% in the first half of the session to $64.86, while broad market indices trade firmly in the red. Call options are on trend with strategists populating Abercrombie & Fitch Co. this morning, with call changing hands on the stock more than three times for each single put option in play today. In- and out-of-the-money call buying in the front month suggests some investors expect the price of the underlying to extend gains through expiration next week. Trading traffic in ANF calls is heaviest up at the September $67.5 strike, where more than 5,650 contracts changed hands against previously existing open interest of 2,880 positions. Not all traders were buyers of the contracts, but it looks like slightly more of the calls were purchased for an average premium of $0.64 each. Investors long the calls make money if Abercrombie’s shares surge 7.5% over the current price of $63.38 (as of 12:05 pm ET) to surpass the average breakeven point at $68.14 by expiration day. Call buying was more prevalent than selling at the September $60 and $65 strikes, as well. Meanwhile, traders selling calls at the September $70 strike roughly 2,200 times for an average premium of $0.28 each, do not seem to expect shares in ANF will extend their rally beyond the $70-level in the next 5 trading sessions. Options implied volatility on Abercrombie & Fitch Co. rose 11.9% to 61.1% in early-afternoon trade.

MUR – Murphy Oil Corp. – The oil and gas exploration and development company’s shares may rally substantially in the next six weeks by the looks of bullish positioning in Murphy Oil Corp. call options this morning. MUR’s shares fell 1.6% to $50.62 by 12:15 pm in New York, but rose earlier in the week, perhaps after being added to the Short-Term Buy List at Deutsche Bank. More than 4,400 calls changed hands at the October $55 strike against open interest of 2,537 contracts. The largest single transaction in the calls appears to be one investor’s purchase of a block of 3,000 contracts for a premium of $1.53 a-pop. The call buyer profits at expiration next month if shares in Murphy Oil jump 11.7% to exceed the effective breakeven price of $56.53. Increasing implied volatility, which currently stands 16.0% higher at 50.09% this afternoon, may also benefit the long options position. MUR’s shares last closed above $56.53 back on August 4.

SNE – Sony Corp. – The Japanese electronics maker’s shares have been hard-hit by challenging macro conditions that are adding to the pain felt in the aftermath of the March earthquake in its home country. Shares in Sony Corp. are down 2.0% this afternoon, hovering just pennies above its 52-week low, to stand at $19.70 as of 12:30 pm on the East Coast. The stock has lost more than 46.0% of its value in 2011, after dropping off of a February 28, 52-week high of $36.97. Options trader ready to draft a comeback story for Sony Corp. shares snapped up call options in the October contract. Investors positioning for a rebound purchased some 3,600 calls at the October $21 strike for an average premium of $0.67 apiece. Buyers of the options profit in the event that Sony’s shares increase 10.0% in the next six weeks to trade above $21.67 at expiration next month.

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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