Option Activity Alert: TIF, BAC, NGD, MWW

TIF – Tiffany & Co. – Investors sporting near-term bullish outlooks on the high-end jewelry retailer flocked to the options market following the sharp post-earnings pullback in the price of Tiffany & Co. shares. Traders gearing up for a rebound in the price of the underlying appear to be selling puts and snapping up calls on the stock. Shares in Tiffany fell as much as 13.1% to an intraday low of $63.98 this morning, and currently trade 9.2% lower on the day at $66.86 as of 12:20 PM in New York. Investors expecting the stock to rise in the next few weeks exchanged more than 4,000 calls at the Dec. $70 strike against previously existing open interest of 1,264 contracts. It looks like the majority of the calls were purchased for an average premium of $1.35 per contract. Call buyers profit if shares in Tiffany & Co. rally 6.7% over the current price of $66.86 to surpass the average breakeven point on the upside at $71.35 by expiration day next month. Meanwhile, put selling suggests some traders believe shares are unlikely to drop much lower in the near term. More than 5,300 puts changed hands at the Dec. $60 strike against open interest of 970 contracts. Investors sold most of these put options to pocket premium of $0.67 per contract, on average. Put sellers walk away with premium in hand at expiration in December as long as shares in Tiffany & Co. exceed $60.00. Investors selling puts may have shares in TIF put to them at an average price of $59.33 each in the event that shares in the jewelry company plunge 11.3% and the options land in-the-money at expiration day.

BAC – Bank of America Corp. – Shares in Bank of America dropped to a fresh two-year low of $5.10 at the start of the session, and the prognosis for the price of the underlying over the next six month period is bleak by the looks of one options strategy initiated in the May 2012 contract. One investor appears to have paid a net $0.18 in premium per contract for a put butterfly spread; buying 2,000 puts at the May $3.0 and $5.0 strikes at premiums of $0.28 and $0.94 apiece, and selling 4,000 puts at the May $4.0 strike for a premium of $0.52 each. The trader may profit if shares in BAC, which are currently down 1.3% on the day at $5.18 as of 11:20 AM ET, decline another 6.95% to breach the effective breakeven point at $4.82 at May expiration. Maximum potential profits of $0.82 per contract are available on the put ‘fly should shares in BofA plunge 22.8% in the next six months to settle at $4.00 at expiration day.

NGD – New Gold, Inc. – Call options on Canadian gold mining company, New Gold, Inc., are flying off the shelves today, with shares in the name rallying as much as 7.1% to an intraday high of $10.67. Investors prepping for shares in New Gold to extend gains in the New Year piled into Jan. 2012 call options straight out of the gate this morning. Thus far in the session, traders have exchanged more than 37,000 in-the-money calls at the Jan. 2012 $10 strike, trumping previously existing open interest of 3,111 contracts. It looks like traders purchased most of these calls for an average premium of $1.22 a-pop. Investors long the call options stand ready to profit should shares in NGD rise another 5.2% over today’s high of $10.67 to surpass the average breakeven price of $11.22 at expiration day in January. Bullish players also purchased roughly 2,400 calls at the higher Jan. 2012 $11 strike for an average premium of $0.78 each.

MWW – Monster Worldwide, Inc. – The operator of global online employment solutions sites popped up on our ‘hot by options volume’ market scanner today after one strategist scooped up a bunch of call options in the front month. Shares in Monster Worldwide declined 1.6% to $6.95 today, which is nearly 75.0% below the stock’s January 7, 2011, 52-week high of $25.90. The investor appears to have purchased roughly 1,600 calls at the Dec. $8.0 strike for an average premium of $0.13 per contract. Profits may be available on the bullish position if shares in Monster Worldwide jump 17.0% over the current price of $6.95 to trade above the breakeven point at $8.13 at expiration day in December.

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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