Options Activity Alert: NWL, RIMM, EMN

NWL – Newell Rubbermaid, Inc. – Big prints in Newell Rubbermaid call options pushed the consumer products provider onto our ‘hot by options volume’ market scanner this morning. The burst of call options activity on the stock appears to be largely driven by one or more traders positioning for the price of the underlying to appreciate in the next couple of months. Shares in Rubbermaid are currently down 0.75% to stand at $17.23 as of 1:15 PM in New York. The Company is scheduled to report fourth-quarter earnings before the market opens on January 27. In-the-money call buying at the February $17 strike this morning, where some 550 calls were picked up for a premium of $0.90 each, was followed minutes later by the purchase of a large block of 10,000 calls at the Mar. $18 strike at a premium of $0.65 apiece. All told, more than 12,600 calls have changed hands at the Mar. $18 strike against open interest of just 156 contracts. Traders long these call options may profit at expiration in March if shares in Rubbermaid surge 8.2% to surpass the effective breakeven price of $18.65. We note that, while the block of 10,000 calls do not appear to be tied to any transaction in the underlying shares today, it’s possible the buyer is short the stock and using the long calls to hedge delta. The interpretation of the transaction would, in that case, change from bullish to bearish as the short stock position yields profits if shares in Rubbermaid decline. Finally, fresh put positions established at the Mar. $17 strike, where around 1,100 contracts were purchased at an average premium of $0.92, suggests some traders are poised to potentially profit should the price of the underlying stock pullback ahead of expiration day.

RIMM – Research In Motion, Ltd. – Weekly call options on the BlackBerry maker are popular with investors placing short-term bullish bets on the performance of RIM’s shares ahead of the long weekend. Shares in Research In Motion rallied 3.6% to $16.17 by 1:00 PM in New York. Options traders exchanged more than 14,000 in-the-money calls at the Jan. ’13 2012 $16 strike against open interest of 7,319 contracts. Investors appear to have purchased the majority of the calls for an average premium of $0.25 apiece, and may profit at expiration as long as the price of the underlying tops $16.25. Bullish activity spread to the weekly $17 strike calls where more than 2,600 contracts were picked up for an average premium of $0.08 each. Traders buying the $17 calls make money if the price of the underlying rallies another 5.6% over the current price of $16.17 to surpass the average breakeven point at $17.08. Options players traded more than 100,000 contracts on RIMM, with calls changing hands roughly 2.7 times for each single put in play on the stock.

EMN – Eastman Chemical Co. – Options on a number of the large chemical companies are more active than usual today, including those covering Eastman Chemical Company. Shares in Eastman, which rose 1.9% to $45.56 in early-afternoon trade, as well as shares in some of its competitors, rallied Thursday after analysts at Citigroup raised price targets on the names. Eastman’s shares have increased more than 25.0% in the past few weeks, but it looks like one investor is taking to the options market to prep for a potential implosion in the stock price ahead of March expiration. The debit put spread initiated on Eastman may be an outright bearish bet on the chemical producer or a hedge established by an investor long the stock. It appears the trader purchased a 4,000-lot Mar. $35/$40 put spread at a net premium of $0.75 per contract. If the spread was purchased outright to position for a sharp pullback in EMN’s shares, the investor stands prepared to make money should the stock plunge 13.8% to trade below the breakeven point at $39.25. Maximum potential profits of $4.25 per contract are available to the put player as long as shares in Eastman Chemical drop 23.2% to settle below $35.00 at expiration day in March. The Company is scheduled to report fourth-quarter earnings after the final bell on January 26.

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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