Options Activity Alert: GMCR, PBI, FMCN

GMCR – Green Mountain Coffee Roasters, Inc. – Shares in Green Mountain Coffee Roasters fell as much as 8.95% this morning to a fresh all-time low of $21.06 after grocery chain operator, Kroger Co., said it plans to sell private label coffee pods for Green Mountain’s Keurig single-cup brewing machine. GMCR’s patent on the K-cups expires in September. Green Mountain’s shares have lost 80.0% of their value since September 2011, when the stock touched an all-time high of $115.98. Options traders expecting shares in GMCR to extend losses snapped up puts on the Waterbury, Vermont-based coffee company. Short-term bearish bets are building in the June $21 strike put where some 2,500 lots were purchased for an average premium of $0.53 apiece. Strategists positioning for a more severe pullback in the price of the underlying picked up roughly 2,000 puts at the July $17 strike for an average premium of $0.66 each. Traders long the $17 strike put stand prepared to profit at expiration next month should shares in Green Mountain tumble 22.4% from today’s low of $22.06 to breach the average breakeven price of $16.34. Not all of the action in GMCR options is bearish today; some strategists appear to be buying out-of-the-money calls that could pay off if shares in GMCR stage a near-term rebound.

PBI – Pitney Bowes, Inc. – Heavier than usual options activity on Pitney Bowes pushed the provider of end-to-end mail stream solutions onto our ‘hot by options volume’ market scanner this morning, with the day’s volume up near 17,000 lots versus the stock’s average daily volume over the past 90 days of 6,713 contracts. Shares in PBI are currently down 1.0% to stand at $14.14 in early-afternoon trading. Almost all of the volume is in the July $13 strike put where more than 16,600 contracts changed hands against open interest of 4,205 contracts. It looks like most of the puts were sold for an average premium of $0.20 apiece, though a sizable block of calls did trade to the middle of the market as well. Put sellers keep the $0.20 in premium received on the trade as long as shares in PBI exceed $13.00 and then contracts expire worthless at expiration next month. Traders selling the put contracts could wind up having shares of the underlying put to them at an effective price of $12.80 each in the event that PBI shares slide 9.5% to trade below $13.00 at July expiration.

FMCN – Focus Media Holding, Ltd. – The operator of an out-of-home advertising network in China popped up on our scanners today after a large, three-legged spread was initiated in the Jan. 2013 expiry. Shares in Focus Media Holding started the trading week in rally mode, but have since surrendered gains to trade 0.30% lower at $20.45 as of 12:30 p.m. ET on Monday. The single-largest trade in FMCN options, the sale of 10,000 Jan. 2013 $30 strike calls against the purchase of the Jan. 2013 $12.5/$17.5 10,000-lot put spread, cost a net $0.85 per contract and may be profitable if shares in the name drop substantially during the second half of 2012. Profits kick in on the downside should FMCN shares fall 18.6% to $16.65, while maximum potential profits of $4.15 per contract are available in the event that Focus Media shares plunge 40.0% to $12.50 by expiration next year.

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.