Options Activity Alert: CSTR, BCS, SWY

CSTR – Coinstar, Inc. – Shares in the provider of coin-counting and Redbox self-service kiosks are bucking the trend today, surging as much as 13.7% during the session to hit a new all-time high of $69.74, after the Company raised its 2012 earnings forecast. The down-day for U.S. equities has taken some of the wind out of Coinstar’s sails this afternoon, though the stock continues to trade 7.6% higher at $66.00 as of 12:25 p.m. on the East Coast. Options on the kiosk provider are far more active than usual, with volume up above 16,000 contracts in early-afternoon trade, versus the stock’s 90-day average volume of 2,012 contracts.  Trading patterns are mixed, but there are some strategists positioning for the rally to continue next week. Out-of-the-money calls in the front month attracted bullish bets, with more than 2,060 contracts changing hands at the April $70 strike against 1,720 open positions. The $72.5 strike calls expiring next week traded more than 540 times, with much of the volume initiated by buyers shelling out an average premium of $0.44 apiece this morning. Traders long the $72.5 strike calls profit at expiration in the event that shares jump 10.5% to surpass the average breakeven price of $72.94. Barring that move, call buyers lose the full amount of premium paid if the options are out-of-the-money at April expiration.

BCS – Barclays PLC – Put options on Barclays are more active than usual, with shares in the financial services provider sliding 4.1% to $13.74 by midday in New York. The stock joined in on the broad market decline, pulling back on European concerns, China’s GDP reading and U.S. consumer confidence data, to snap the three-day rally in equities. The heaviest action in BCS options is in the May $13 strike put, where 4,000 contracts changed hands against open interest of 182 open positions. It looks like one trader paid $0.50 per contract to position for shares in the name to extend losses in the near term. Profits are available to the downside should shares in Barclays decline another 9.0% to breach the effective breakeven price of $12.50 by expiration. The financial services provider is scheduled to report first-quarter earnings ahead of the opening bell on April 26th. Shares in financial giants, JPMorgan and Wells Fargo, are down more than 2.0% today in the aftermath of their earnings reports.

SWY – Safeway, Inc. – Call buying on grocery operator, Safeway, Inc., commenced straight out of the gate this morning as shares in the name continued higher on buyout speculation.  Shares in Safeway are up 3.7% at $21.44 this afternoon, after earlier rising as much as 4.9% to $21.68 intraday, and on the heels of a 10.0% rally during the past week. Options volume in Safeway is heaviest in the front month, with more than 6,900 calls in play at the April $22 strike against open interest of 1,534 open positions. It appears the majority of the contracts were purchased for an average premium of $0.22 apiece in the first 10 minutes of the trading session. Premium required to buy the $22 strike calls has doubled intraday to $0.45 per contract as of 12:45 p.m. in New York trade. Call buyers profit at expiration next week as long as shares in Safeway rally another 3.6% to top the average breakeven price of $22.22. Safeway’s shares last traded above $22.22 back on March 19th. The food and drug retailer is scheduled to report first-quarter earnings ahead of the open on April 26th, the week after April options expire.

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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