Options Activity Alert: FBHS, ORCL, WM

FBHS – Fortune Brands Home & Security, Inc. – Shares in the home and security products company that was spun off from Fortune Brands in 2011 are up 4.5% this morning at $23.27. Call options on the company, which sells products under well-known brands including, Master Lock and Moen, among others, are more active than usual today. Trading traffic in the August expiry calls suggests one or more investors may be positioning for the price of the underlying to rally to the highest level since the spin off. Upwards of 1,000 calls changed hands at the Aug. $25 strike versus previously existing open interest of 105 contracts. It looks like most of the calls were purchased for a premium of $0.40 apiece. Call buyers may profit at expiration next month should shares in FBHS rally another 9.2% to surpass the breakeven price of $25.40. Fortune Brands Home & Security is scheduled to report second-quarter earnings after the close of trading on July 25th.

ORCL – Oracle Corp. – A large bearish spread initiated in Oracle Corp. options this morning sees shares in the name potentially pulling back more than 20.0% from the current level during the second half of the year. Shares in Oracle are down 0.75% as of midday to stand at $29.47, returning some Friday’s more than 5.0% rally in the stock. It looks like one strategist initiated a 9,000-lot Dec. $23/$28 put spread, the largest blocks printing 7,622 contracts in the first 30 minutes of the trading week, for a net premium outlay of $1.08 apiece. Profits kick in on the position should shares in Oracle Corp. decline 8.7% to breach the breakeven price of $26.92, while maximum possible profits of $3.92 per contract are available should the stock drop 22.0% to $23.00 by December expiration. The put spread is the largest trade in Oracle options so far today. The transaction could be a hedge to protect the value of a long position in the shares or an outright bearish stance on the stock over the next six months. Oracle was raised to ‘Outperform’ at RBC Capital Markets on Friday.

WM – Waste Management, Inc. – Heavy put buying on the Houston, Texas-based provider of waste management services pushed Waste Management, Inc. onto our ‘hot by options volume’ market scanner this morning, with options volume on the name up 945% at 23,375 contracts versus average daily volume of 2,473 contracts. Shares in WM are down 1.0% at $33.07 as of 12:20 p.m. in New York. Nearly all of the action in Waste Management options is in the August expiry puts, where the $33, $32, $31 and $31 strikes attracted the bulk of the volume. The Aug. $31 strike put is most active, with upwards of 10,100 contracts in play versus open interest of 157 lots. More than 5,000 put options changed hands at both the Aug. $30 and $33 strikes, while the $32 put traded approximately 3,100 times. The transactions appear to be opening positions in all cases give current open interest levels. The trader or traders responsible for the put activity on Waste Management today may be securing downside protection ahead of the company’s July 26 second-quarter earnings report.

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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