Option Activity Alert: SINA, BLK, KKD, SCHW

SINA – Sina Corp. – Shares in SINA Corp. quickly surrendered gains enjoyed at the open of U.S. markets, plunging as much as 11.2% to $56.05 before recovering somewhat to stand 4.5% lower on the day at a fresh 52-week low of $60.30, as of 11:30 AM in New York trade. The steep drop in SINA’s shares reportedly followed what some say is the misreading of an article in the Chinese-language version of the Wall Street Journal that mentioned the company in close proximity to research firm Muddy Waters. Shares are well off their lowest point of the session, but have not fully recovered from the selloff. Investors were quick to initiate bearish stances on the stock using put options after the stock turned-tail in early trade. Heavy trading traffic in the weekly put options indicates some traders are taking short-term bearish positions on the Chinese internet company in case shares in the name continue to come under fire over the next several sessions to expiration. Deep out-of-the-money puts are attracting substantial volume, with more than 3,900 puts changing hands at the Dec. ’02 $50 strike against open interest of just 14 contracts. It looks like investor purchased the majority of the puts at this strike for an average premium of $0.85 a-pop. Put volume exceeds 3,500 contracts up at the Dec. ’02 $55 and $57.5 strikes, as well. Options expiring on December 16 are quite active this morning, although not all transactions appear to be the work of bearish players. One investor sold a block of 3,881 puts at the Dec. $40 strike to pocket premium of $0.50 per contract. The trader walks away with the full amount of premium as long as shares in SINA Corp. top $40.00 at December expiration. SINA’s shares are down roughly 60.0% off their April 19, 2011, 52-week high of $147.12. Put buyers may profit if shares in the name continue to slide in the next few weeks.

BLK – BlackRock, Inc. – The investment management company’s shares took off this morning, rallying as much as 6.0% to an intraday high of $160.34. The sharp rebound erases the prior week’s pullback, although the stock continues to trade at a roughly 25% discount to its March 3, 2011, 52-week high of $209.77. One investor responsible for big prints in Jan. 2012 contract put options is prepared in the event that BlackRock’s shares realize double-digit declines in the next couple of months to expiration. It looks like the trader purchased the 8,500-lot Jan. 2012 $115/$130 put spread for a net premium of $1.80 per contract. The strategist may profit at expiration next year should shares in BlackRock drop 20.0% to breach the effective breakeven price of $128.20. Maximum potential profits of $13.20 per contract are available on the spread should shares in BLK plummet 28.3% to trade below $115.00 at expiration in January. Shares in BlackRock last traded around $115.00 back in March 2009.

KKD – Krispy Kreme Doughnuts, Inc. – Investors breakfasted on Krispy Kreme call options this morning, with shares in the Doughnut maker rising 6.0% in the first half of the session to $6.70 by 11:00 AM in New York. Krispy Kreme Doughnuts is scheduled to report third-quarter earnings after the final bell on Wednesday. Bulls prepared to benefit from a post-earnings run-up in KKD shares looked to the Dec. $7.5 strike, where more than 3,400 calls changed hands against open interest of 1,330 contracts. It looks like most of the calls were purchased for an average premium of $0.23 a-pop. Call buyers profit at expiration next month as long as shares in the name surge 15.4% over the current price of $6.70 to surpass the average breakeven price at $7.73.

SCHW – The Charles Schwab Corp. – Fresh prints in Charles Schwab call options suggests at least one strategist is prepared to see beaten-down shares in the financial services firm rebound by January 2012 expiration. The stock joined in on the broad market rally today, gaining 4.0% to $11.20 by 11:15 AM ET. It appears the investor responsible for most of the activity in Schwab options made moves within minutes of the opening bell this morning. The trader purchased at least 4,100 in-the-money calls at the Jan. 2012 $11 strike for an average premium of $0.95 each. Profits may be available to the bullish player in the event that shares in Schwab rally another 6.7% over the current price of $11.20 to exceed the average breakeven point at $11.95 at expiration day in January. The financial services provider is slated to report fourth-quarter earnings ahead of the opening bell on January 18, just a couple of days before the call options are set to expire.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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