Options Activity Alert: BP, RSH, FTI, MYGN

BP – BP PLC – Far out-of-the-money call options on BP saw heavier-than-usual activity on Tuesday afternoon, with shares in the oil company trading up 1.3% at $44.70 as of 12:30 p.m. in New York. Fresh prints in March expiry calls may represent low-cost, low-probability bullish bets that shares in BP will rally sharply by expiration. BP is scheduled to release fourth-quarter earnings ahead of the opening bell on February 7, one week from today. Options traders exchanged more than 3,000 call options at the Mar. $49 strike against open interest of 621 contracts. The majority of the calls appear to have been purchased for an average premium of $0.22 apiece. Like-minded strategists snapped up some 3,500 calls at the higher Mar. $50 strike at an average premium of $0.11 each. Investors long the calls may profit at expiration in March in the event that BP’s shares soar 10.1% and 12.1% to exceed average breakeven prices of $49.22 and $50.11, respectively. Overall trading in BP options players are heavily favoring calls on the name over puts today, with more than 4.2 calls changing hands on the stock for each single put option in early-afternoon trade.

RSH – RadioShack Corp. – Shares in consumer electronics retailer, RadioShack Corp., plunged 30.0% to $7.15 on Tuesday after the Company revealed lower-than-anticipated preliminary fourth-quarter earnings and suspended stock buybacks. The breath-taking drop in the price of the underlying shares spurred some options traders to ready themselves for a potential rebound in the next few weeks. Call buyers looked to the Feb. $7.0, $8.0 and $9.0 strike calls, buying around 1,600, 3,200 and 235 contracts at each strike, respectively, this morning. Investors long the calls may have picked up the contracts at bargain-level prices should shares in RadioShack recover in the near term. For example, traders long the Feb. $8.0 strike calls paid an average premium of $0.23 per contract, and may profit at February expiration if shares in RSH surge 15.1% off their $7.15 intraday low to surpass the average breakeven price of $8.23. Fourth-quarter results from RadioShack are expected out on February 21 after the close.

FTI – FMC Technologies, Inc. – The provider of technology solutions for the energy industry popped up on our market scanners this morning after a large block of far out-of-the-money call options changed hands in the February contract. The call options appear to have been purchased, perhaps by an investor initiating a bullish bet on the name, ahead of FMC Technologies, Inc.’s fourth-quarter earnings report on Valentine’s Day. FTI’s shares commenced the session in rally-mode, but are currently negative on the session to stand at $51.63. The stock was cut to ‘neutral’ from ‘buy’ with a 12-month target share price of $50.00 at Miller Tabak earlier in the week. Options volume on FMC Technologies is concentrated at the Feb. $57.5 strike, where more than 2,400 calls changed hands against open interest of 251 contracts. Call volume today is particularly high relative to overall open interest in FTI options of 6,892 positions. It looks like all of the calls were purchased for an average premium of $0.35 each, thus positioning the buyer of the contracts to profit in the event that FTI’s shares soar 12.05% to a new all-time high of $57.85 at expiration.

MYGN – Myriad Genetics, Inc. – Shares in Myriad Genetics, a biotechnology company focused on the development and marketing of molecular diagnostic products, are up 2.7% at $23.89 this morning ahead of the Company’s second-quarter earnings release after the close. A sizable 2,000-lot short strangle on Myriad is the single largest options trade on the name today, a substantial position relative to overall open interest of 13,329 contracts. It looks like one investor combined the purchase of 200,000 shares of the underlying stock at $23.40 each with the sale of 2,000 calls at the Aug. $25 strike and the sale of 2,000 puts at the Aug. $23 strike. Combined premium received on the short strangle amounts to $3.85 per contract or $770,000 in total.

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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