Options Activity Alert: PFCB, IMAX, VRA

PFCB – P.F. Chang’s China Bistro, Inc. – Options on the owner and operator of two restaurant chains, P.F. Chang’s China Bistro and Pei Wei Asian Diner, were more active than usual this week following the Company’s fourth-quarter earnings report ahead of the bell on Thursday. Shares are up sharply today on a number of analyst upgrades, trading higher by as much as 8.1% to touch an intraday peak of $38.50. Traders that purchased calls on P.F. Chang’s yesterday despite the Company’s earnings miss, in some cases saw the value of their positions significantly increase overnight. It looks like investors purchased as many as 750 calls at the Mar. $35 strike yesterday for an average premium of $1.34 each. The calls today cost more than two times that amount, with the last traded price on the contracts up at $3.40. Finally, options traders positioning for shares to extend gains purchased some 250 calls up at the Mar. $40 strike at a premium of $0.60 apiece. Investors long the $40 strike calls stand prepared to profit in the event that shares in P.F. Chang’s increase 7.0% over the current price of $37.95 to exceed the effective breakeven price of $40.60 at March expiration. PFCB’s shares last traded above $40.60 back in July 2011.

IMAX – IMAX Corp. – Shares in the entertainment technology company are up 0.35% at $23.81 this morning, down 4.75% off a six-month high of $25.00 reached earlier in the week. The stock has rallied 90.0% off its October 2011 52-week low of $12.57, but options activity on IMAX Corp. today suggests one strategist expects the price of the underlying to reverse course in the near term. The stock and option combo initiated on IMAX in the first hour of the session appears to be one trader’s way to take a bearish stance ahead of the Company’s fourth-quarter earnings report next Thursday. It looks like the investor purchased 5,000 calls at the Mar. $26 strike for a premium of $0.89 each and sold 165,000 shares of the underlying at $23.96, on a 33 delta. The investor makes money on the short stock position if shares in IMAX pullback, while the long calls act as a hedge against further upside moves in the shares through March expiration.

VRA – Vera Bradley, Inc. – The maker of quilted tote bags and casual accessories for women popped up on our ‘hot by options volume’ market scanner today on heavy trade in the March expiry calls. Traders may be perusing Vera Bradley options ahead of the Company’s fourth-quarter earnings report on March 14. The stock is down 0.60% at $37.41 in early-afternoon trade, and, although shares in the retailer are up 14.0% year-to-date, the stock continues to trade at a nearly 30.0% discount to the May 2011 52-week high of $52.36. Activity in the March expiry call options may be a sign of investor optimism that the price of the underlying will extend gains following earnings next month. It looks like 1,600 calls changed hands at the Mar. $40 strike against open interest 33 contracts at that strike and overall open interest of 2,344 total open positions on the stock. The investor responsible for the spike in call volume today appears to have purchased the majority of the contracts for an average premium of $1.56 per contract. Profits may be available to the strategist in the event that Vera Bradley’s shares soar 11.1% to top the average breakeven price of $41.56 at March expiration.

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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