Options Activity Alert: TIF, KORS, CHS

TIF – Tiffany & Co. – Options on the world’s second-largest luxury jewelry retailer are mixed today, with much of the action centering in the front month calls and puts. The day’s volume, currently at 21,500 contracts as of 11:35 a.m. in New York, is more than twice the stock’s 90-day average volume of 9,971 options. The pick-up in options activity arrives on the heels of the Company’s fourth-quarter results and full-year earnings guidance ahead of the opening bell. The jeweler’s full-year earnings forecast at $4.05 per share beat analyst expectations, sending the price of the underlying up as much as 8.0% on Tuesday morning to $74.20. The sharp rally in Tiffany’s shares is a move one strategist had been positioning for last week. It appears the investor initiated a bull call spread back on Monday March 12, buying the April $70/$75 spread roughly 3,500 times at an average net premium of $1.54 per contract. The rise in open interest at both strikes in the days that followed may mean the trader added to the position last week. The bullish play on the jeweler is working out so far, with the shares well above an estimated breakeven share price of $71.54 on the spread. The trader walks away with maximum available profits as long as Tiffany’s shares move up another 1.1% over today’s high of $74.20 to top $75.00 at expiration next month.

KORS – Michael Kors Holdings, Ltd. – The number of open options positions on Michael Kors Holdings, Ltd., as measured by open interest of 30,337 total contracts, is roughly 65.0% comprised of call positions. The preponderance of open KORS calls versus puts was heightened yesterday by one large transaction involving roughly 10,200 far out-of-the-money front month calls. The Company guided up its estimate for fourth-quarter earnings and said same-store sales are up nearly 36.0%. Shares in the name are down 0.30% at $45.19 today, however, on supply-chain concerns stemming from a move to a new distribution center and related delays in shipments to customers. It looks like the large block of April $50 calls on Monday sold for a premium of $1.00 per contract. The calls were not marked as a spread and appear to have been sold outright. The trader selling the contracts may walk away with maximum possible profits of $1.00 per contract at April expiration as long as shares in KORS fail to rally above $50.00. The move lower in shares of the apparel and accessories retailer today already has the position working in his or her favor, as the call options could potentially be bought back this afternoon at $0.40 each for net profits of $0.60 apiece. As of 12:45 p.m., only 178 calls have changed hands at the April $50 strike. Overall options volume of 10,550 contracts in play on KORS today is roughly three times the 90-day average option volume of 3,505 contracts.

CHS – Chico’s FAS, Inc. – Women’s clothing and accessories retailer, Chico’s FAS, Inc., popped up on our ‘hot by options volume’ market scanner this morning after a large number of call options changed hands in the front month. Shares in the Fort Myers, Florida-based retailer are up 3.2% at $15.57 just before 1:00 p.m. on the East Coast. Options volume on CHS is concentrated at the April $16 strike, where more than 5,900 calls changed hands against open interest of 1,162 positions. The majority of the calls appear to have been purchased for an average premium of $0.40 apiece. Buyers of the options stand ready to profit should the price of the underlying rally another 5.3% to surpass the average breakeven price of $16.40 at expiration. Chico’s shares are up 40.0% year-to-date and last traded north of $16.40 in July 2011.

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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