Options Activity Alert: CRUS, VRA, CMG

CRUS – Cirrus Logic, Inc. – Traders accumulating put options on Cirrus Logic this week may be bracing for potential bearish movement in the price of the underlying ahead of Apple, Inc.’s second-quarter earnings report on Tuesday, and the Company’s own fourth-quarter release on Wednesday. Shares in audio chip maker Cirrus, which generates roughly 70% of its revenues from business with Apple, is down 3.3% today at $22.20. The stock rallied briefly at the open on a new ‘Buy’ rating and share price target of $40.00 by Sterne Agee this morning, but quickly turned-tail as the final trading day of the week progressed. Put open interest in the May expiry has increased over the past couple of days, with interest continuing to build in the contracts this morning. The May $21 strike put options are the most heavily traded by volume, with some 2,100 contracts in play as of 12:20 p.m. in New York. It looks like one or more traders purchased the majority of the $21 puts for an average premium of $0.82 apiece in the first half of the trading session. Yesterday, around 1,100 of these contracts were purchased for an average premium of $0.60 each. The intraday erosion in the share price has lifted premium on the puts substantially, with the last traded price of $1.15 up 90.0% overnight and roughly 40.0% since the bulk of the options were purchased this morning. Put buyers were also active in the May $22 strike contracts yesterday, snapping up some 1,240 positions, as well as the May $24 strike put options, purchased roughly 2,500 times on Thursday for an average premium of $1.83 each. The value of these bearish put options will continue to climb in the event that CRUS shares extend losses through May expiration.

VRA – Vera Bradley, Inc. – Shares in the maker of quilted handbags and accessories, down nearly 50.0% off the 2011 52-week high of $52.36, may continue to unravel this summer by the looks of bearish put buying in the August expiry today. The stock is down 1.5% this afternoon to stand at $27.20 as of 1:00 p.m. ET. Vera Bradley options are more active than usual, with the bulk of the volume changing hands just before midday. It looks like one trader eyeing fresh lows in the shares purchased 2,000 put options at the Aug. $22.5 strike for a premium of $1.25 apiece. The position may be profitable at expiration in August if shares in VRA slide more than 20.0% from the current price of $27.20 to settle below the effective breakeven point at $21.25. A roughly 22.0% correction in the shares to $21.25 during the next four months to expiration would drag the price of the shares to new record lows.

CMG – Chipotle Mexican Grill, Inc. – Shares in the provider of burrito bowls are selling off following the Company’s first-quarter earnings report, trading down 1.5% at $424.20 this afternoon, but options activity on the stock suggests at least one strategist is positioning for shares in Chipotle Mexican Grill to potentially hit a fresh record high in the next few weeks. Of note is bullish volume building in the May $455 strike call options. It looks like some 1,500 of the contracts were purchased this morning for an average premium of $4.27 apiece. Call buyers profit at expiration next month as long as shares in Chipotle surge 8.3% to surpass the average breakeven price of $459.27. The stock’s all-time high is the April 14th intraday peak at $442.40.

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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