Options Activity Alert: LSI, DB, ATHN

DB – Deutsche Bank AG – Heavy trading traffic in Deutsche Bank put options this morning, one week before the investment banking firm is scheduled to report fourth-quarter earnings, may mean some traders are bracing for a pullback. Shares in DB are currently up 0.40% to stand at $43.80 as of 12:40 p.m. in New York. The single-largest put trade on the stock today was the purchase of 9,500 puts at the April $40 strike for a premium of $2.45 each. Though the put options were not marked as a spread against stock, it is possible the put buyer seeks to protect the value of shares already in his or her portfolio. Alternatively, the investor may be taking an outright bearish stance on DB over the next three months. In the latter scenario, the trader may profit if Deutsche Bank’s shares plunge 14.3% to breach the effective breakeven point at $37.55 at April expiration. Meanwhile, the purchase of a 2,000-lot Mar. $35/$45 put spread at a net premium of $2.75 per contract yields profits – or downside protection – to its owner in the event of a 3.5% decline below the breakeven share price of $42.25. Traders populating DB options are overwhelmingly favoring puts over calls ahead of earnings, with today’s put-call ratio hovering just below 15.0 and overall put-call interest greater than 1.4.

ATHN – athenahealth, Inc. – One cautiously optimistic investor appears to have purchased a sizable position in athenahealth put options this morning in order to hedge a long position in the stock. Shares in the provider of cloud-based business services for physician practices rose 1.05% to $57.91 this afternoon, extending gains realized earlier in the week on the heels of a new ‘Buy’ rating at Sterne, Agee & Leach with a 12-month target price of $71.00. It looks like the trader responsible for the single-largest transaction in ATHN options purchased 58,000 shares at $56.84 each this morning, hedging the long stock position with the purchase of 2,000 protective put options at the Jun. $50 strike for a premium of $4.30 apiece. The trader makes money on the way up by holding shares in athenahealth, but limits potential losses should the price of the underlying decline in the face of macroeconomic or company-specific headwinds ahead of June expiration.

LSI – LSI Corp. – The chip maker’s shares jumped in after-hours trading on Wednesday after the Company forecast stronger-than-expected first-quarter performance. Shares in LSI Corp. rallied 12.6% post-earnings to touch a new 52-week high of $7.97 on Thursday. The stock has gained 32.0% since the start of the New Year. Investors expecting LSI’s shares to continue their winning streak snapped up calls in the front month. Call volume is heaviest at the Feb. $8.0 strike where more than 2,250 contracts changed hands against open interest of just 25 positions. It looks like the majority of these call options were purchased for an average premium of $0.24 a-pop. Buyers of the calls stand prepared to profit in the event that LSI Corp.’s shares rally another 3.4% to surpass the average breakeven price of $8.24 at expiration next month. Finally, one investor appears to have taken advantage of the huge run-up in LSI Corp. shares during the month of January. It looks like the trader purchased 1,000 calls at the Feb. $6.0 strike for an average premium of $0.87 each back on January 5. The sharp increase in the price of the underlying since then has pushed premium required to purchase the Feb. $6.0 strike call up to $2.00 per contract at last check.

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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