Options Activity Alert: RVBD, LL, FCN

RVBD – Riverbed Technology, Inc. – Front month trading traffic on Riverbed Technology suggests the profits are flowing for one options strategist that hit it out of the park on a three-legged bullish position initiated ahead of the company’s second-quarter earnings report. Shares in the maker of computer networking products are up better than 26% to stand at $18.35 as of midday on the East Coast after the company posted better-than-expected earnings for the second quarter and said full year revenue is likely to increase more than analysts were expecting. It looks like one trader yesterday sold 2,000 puts at the Aug. $13 strike in order to partially offset premium required to buy a 2,000-lot Aug. $14/$17 call spread, all for a net premium outlay of $0.34 per contract. The sharp move to the upside in Riverbed’s shares overnight far exceeded the more than 15% rally required for the position to realize maximum possible profits. Activity in the options today suggests the trader is raking in the chips, closing out all three legs to enjoy net profits of $2.23 per contract in overnight gains. Meanwhile, traders positioning for Riverbed’s shares to extend gains in the near term picked up another 1,100 calls at the Aug. $19 strike for an average premium of $1.02 apiece. Call buyers may profit in the event shares tack on another 9% to exceed the average breakeven price of $20.02 by expiration next month.

LL – Lumber Liquidators Holdings Inc. – Shares in the retailer of hardwood flooring soared to a record today after the company posted better-than-expected second-quarter earnings and upped its full year profit and revenue forecasts. Lumber Liquidators shares jumped 25% to an intraday and new all-time high of $40.77 at the start of the session, sparking increased activity in options on the stock. Traders positioning for shares in Lumber Liquidators to continue higher in the near term purchased upside calls on the name this morning. One player picked up a block of 100 calls at the Aug. $45 strike for a premium of $0.40 each. Profits are available on the position in the event LL’s shares jump 11% in the next few weeks to exceed the effective breakeven price of $45.40 at expiration. Like-minded bulls appear to be buying up calls out at the Sept. $45 and Nov. $45 strikes as well.

FCN – FTI Consulting, Inc. – Bullish positioning appears to be on the rise in FTI Consulting options ahead of the company’s earnings report on August 1st. It looks like traders today stepped in to buy a couple hundred calls at each of the Aug. $28 and $29 strikes at average premiums of $0.40 and $0.25 apiece, respectively. Volume is heaviest in the Aug. $27 strike call where around 450 calls were picked up for an average premium of $0.75 each. Traders long the $27 strike call may profit at expiration next month if shares in the consulting firm climb 8% to top the average breakeven price of $27.75. Shares in the West Palm Beach, Florida-based company today rose 0.95% to $25.77, but have fallen more than 40% since February.

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.

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