Options Activity Alert: MTOR, SWK, WMT

MTOR – Meritor, Inc. – Of the 18,255 open options positions on the supplier of parts for manufacturers of trucks, trailers and specialty vehicles, most are open call positions, with the stock’s call-to-put open interest ratio currently at 2.042. Call options on Meritor are active today, as well, with more than 50 calls changing hands on the stock for each single put option in play. The action in MTOR options this morning suggests one or more investors is preparing for shares in the Troy, Michigan-based Company to rally ahead of expiration next month. One catalyst for the bullish look may be Meritor’s upcoming second-quarter earnings report set for release ahead of the opening bell on May 2nd. The stock today trades 1.3% lower on the session at $6.88 as of 12:30 p.m. ET. Call open interest patterns indicate an influx of buyers starting in mid-March, with the trend continuing this morning. The biggest play in MTOR options today is the purchase of 1,000 calls at the May $8.0 strike at a premium of $0.20 apiece. Profits may be available on the contracts should shares in Meritor jump 19.2% to top $8.20 by May expiration. Much of the call open interest at surrounding strike prices in the May expiry appear to have been generated by buyers taking positions back on March 21st, when MTOR’s shares jumped 13.0% intraday to $8.46 after the Company reaffirmed its outlook for 2012 revenue and earnings forecasts. In the three weeks since, the stock has reversed gains, and then some. Needless to say, buyers of the contracts at the end of March paid far more than traders today, as evidenced by the 75.0% decline in May $8.0 strike call option premium from $0.81 apiece on March 21st to today’s asking price of $0.20 each.

SWK – Stanley Black & Decker, Inc. – Bullish options are in play on construction tools provider, Stanley Black & Decker, Inc., this morning with shares in the name trading up 0.45% at $77.00 as of 11:00 a.m. in New York. Sizable blocks of calls purchased on the stock in the first 15 minutes of the session suggests one or more investors may be positioning for the price of the underlying to hit new all-time highs in the near future. Stanley Black & Decker is scheduled to report first-quarter earnings after the close on Wednesday. SWK options volume is heaviest in the May $85 strike call, where more than 1,700 contracts changed hands against open interest of 59 positions. It looks like the majority of the contracts were purchased outright for a premium of $0.35 apiece. Profits are available at expiration next month in the event that shares rally 10.8% to surpass the effective breakeven price of $85.35. The stock has come down 6.0% from the March 16th record-high of $81.90, but remains up 11.5% year-to-date.

WMT – Wal-Mart Stores, Inc. – Shares in Wal-Mart are among the top gainers in the Dow Jones Industrial Average today, helped higher by better-than-expected U.S. retail sales data released this morning. The stock is currently up 1.25% at $60.52 as of 11:30 a.m. on the East Coast. The single-largest trade in Wal-Mart options today signals possible investor optimism for continued near-term gains in the price of the underlying. Options volume is greatest at the April $60 strike where upwards of 13,300 in-the-money calls have changed hands so far today. Current volume is less than the 14,372 open call positions at that strike. A block of 7,242 $60 calls, the largest transaction in WMT options this morning, appear to have been purchased for a premium of $0.51 a-pop at the start of the session. All told, it looks like more than 9,200 of the front-month $60 calls were picked up at an average premium of $0.50 each. Call buyers profit as long as shares in Wal-Mart Stores exceed the average breakeven price of $60.50 at expiration this week.

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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