Options Activity Alert: UIS, GPS, MS

UIS – Unisys Corp. – Higher-than-expected first-quarter profits reported by information technology services provider, Unisys Corp., on Tuesday sent shares in the name up sharply to the benefit of some pre-earnings report call buyers. Shares in Unisys, which had declined significantly this year, rose as much as 28.0% in the first half of the session to $20.98. Bullish positions initiated in the front month prior to the earnings release have in some cases more than tripled in value. Of note, the purchase of some 745 May $17 strike call options for a premium of $1.00 on Friday April 20th, are now deep in-the-money and trade at $3.80 apiece. Meanwhile, open interest in the May $18 strike calls suggests close to 300 contracts were picked up for a premium of $0.65 each yesterday afternoon. The spike in shares overnight now sees the $18 calls changing hands at a last-traded price of $2.95 per contract, a roughly 350% increase in premium. Options on Unisys Corp. are far more active than usual overall today with some 5,350 contracts in play this afternoon versus the 90-day average options volume of 506 contracts on the stock. Traders are focusing their efforts in UIS calls, exchanging roughly 3.7 calls for each single put option traded.

GPS – Gap, Inc. – Shares in the apparel and accessories retailer are up 1.6% at $27.63 this morning, just off Friday’s fresh 52-week high of $27.95. The stock has soared in 2012, rising nearly 50.0% year-to-date. But, a large bear put spread initiated in the front month a couple of minutes into the trading day suggests one strategist is prepared should shares slip in the near term. Gap is scheduled to report first-quarter earnings on May 17th after the close. The trader responsible for the hefty spread appears to have purchased 10,000 puts at the May $26 strike, sold the same number of puts at the May $24 strike, all for a net premium outlay of $0.32 per contract. The put play may be a hedge to protect a long position in the underlying shares, or an outright bearish bet predicting limited declines in the share price leading up to- or following earnings. Profits, or downside protection, kick in if shares in GPS fall 7.0% to breach the effective breakeven point at $25.68, with maximum potential gains of $1.68 per contract available in the event of a 13.1% pullback in the stock to $24.00.

MS – Morgan Stanley – Shares in Morgan Stanley are down more than 20.0% off the March 26th six-month closing-high of $21.18, but one sizable options play on the name today seems to be looking for a quick recovery in the price of the underlying during the next three weeks. The shares are down 2.6% this afternoon to stand at $16.95. The options play eyeing limited bullish movement in the price of the underlying appears to be a ratio call spread combining the purchase of around 10,000 May $18 strike calls with the sale of roughly 20,000 May $20 strike calls, all for a net premium of $0.14 per contract. The strategy is profitable as long as shares in the financial services firm rally 7.0% to top the effective breakeven price of $18.14 with maximum possible profits of $1.86 per contract available should the stock gain 18.0% to settle at $20.00 at expiration next month.

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.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.