Options Activity Alert: XLF, AKAM, OI

XLF – Financial Select Sector SPDR ETF – All 10 sectors of the S&P 500 index are in positive territory today after ECB President Mario Draghi said policy makers will do what is necessary to preserve the euro. Shares in the XLF, although off their highs of the session, continue to trade up 1.2% on the day at $14.44 as of 12:15 p.m. in New York. Draghi’s market-moving comments did not manage to make an optimist of one options player who appears to have pulled the trigger on a large position in XLF puts this morning just as the price of the underlying was reaching its highs for the day. It looks like the trader is positioning for shares in the ETF to sustain double digit decline during the next few months by purchasing approximately 70,000 puts at the Oct. $13 strike for an average premium of $0.25 apiece. The bearish position may be profitable at expiration in the event XLF shares slide more than 11% to trade below the average breakeven price of $12.75. Though the transaction was not tied to stock, it is possible the put buyer is hedging a long position in shares of the XLF as opposed to taking an outright bearish stance on the financials. The cost of securing downside protection in the form of Oct. $13 puts is relatively cheaper to come by today with shares in the ETF up and the cost of the options down $0.08 since Monday.

AKAM – Akamai Technologies, Inc. – Strong cloud-computing demand helped Akamai Technologies post better-than-expected second-quarter profit and sales after the closing bell on Wednesday, sending shares in the name screaming to the upside on Thursday. Shares in Akamai are up better than 23% in early-afternoon trade to stand at $34.82 and it looks like some options players are positioning for the price of the underlying to extend gains in the second half of the year. Notable fresh interest is building in the Nov. $33 strike call where upwards of 4,300 contracts changed hands versus previously existing open interest of 251 contracts. It appears the majority of the now in-the-money call options were purchased for an average premium of $4.03 apiece this morning. Intraday strength in the AKAM shares now has the same contracts displaying a higher price tag of $4.45 per contract. Call buyers stand ready to profit at expiration in November should Akamai’s shares tack on another 6% to surpass the average breakeven price of $37.03.

OI – Owens-Illinois, Inc. – Shares in the world’s largest glass bottle manufacturer fell 7% today to $17.32 after the company posted better-than-expected second-quarter profits but said earnings in the current quarter are likely to be hurt by weaker sales in Europe. Options on Owens-Illinois are more active than usual following the earnings report, with more than 13,000 contracts in play versus the stock’s 90-day average daily options volume of 633 contracts. Upside calls expiring in August and September are the most heavily traded options despite the move lower in shares, perhaps as some strategists prep for a near-term bounce in the price of the underlying. Traders appear to have purchased more than 5,000 calls at the Aug. $19 strike for an average premium of $0.39 each and another 1,000 calls at the Sept. $19 strike at an average premium of $0.71 apiece. Profits are available on the positions if shares in the bottle maker jump 12% and 14% to top average breakeven prices of $19.39 and $19.71, respectively, by options expiration dates in August and September.

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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