Options Activity Alert: NDAQ, CBI, IPGP

NDAQ – NASDAQ OMX Group, Inc. – Bearish options activity on the second-largest U.S. equity exchange operator suggests shares in NASDAQ OMX Group, Inc., currently down 1.3% on the day at $22.86 as of 11:15 a.m. ET, may extend losses during the next couple of months. Better-than-expected second-quarter earnings from the company against the backdrop of a broad market rally added 8% to NDAQ’s share price in the second half of last week. The stock surrendered some of those gains Monday and Tuesday, however, and it appears one strategist is positioned to benefit from continued weakness in the share price going forward. Options on NDAQ are most active at the Sept. $23 strike where upwards of 1,400 in-the-money puts changed hands against open interest of 973 contracts. The buyer of the $23 strike puts paid an average premium of $1.10 apiece and makes money at expiration as long as shares in NASDAQ drop 4% to breach the breakeven point on the downside at $21.90.

CBI – Chicago Bridge & Iron Co. – Traders positioning for shares in Chicago Bridge & Iron Co. to bounce following Monday’s severe 14% decline on news the company agreed to buy Shaw Group Inc. for about $3 billion are picking up front month calls on the stock this morning. Shares in CBI recovered a bit in the first half of the trading session Tuesday, standing 0.50% higher at $35.12 as of midday in New York, despite a number of analyst downgrades. Options players betting on a more substantial recovery in the shares in the next couple weeks traded upwards of 5,800 calls at the Aug. $39 strike against open interest of 492 contracts. It looks like most of the calls were purchased for an average premium of $0.32 apiece, thus positioning buyers to profit in the event of a 12% move to the upside in CBI’s stock price by August expiration.

IPGP – IPG Photonics Corp. – Shares in the maker of fiber lasers jumped 21% today to a five-month high of $58.37 after the company posted better-than-expected second-quarter earnings and provided guidance for third quarter earnings and revenue above analyst forecasts. Buyers of the front month calls ahead of IPG Photonics Corp.’s earnings report saw the value of their positions shoot to the upside with the move in the stock today. Open interest of 1,005 contracts at the Aug. $50 strike, the largest among all available IPGP options, were mostly purchased last week at an average premium of $1.36 apiece. Last Wednesday, for example, a block of 228 of the $50 strike calls were purchased for $1.00 per contract. Since then the value of the contracts has increased more than five-fold given the current bid/ask spread of $5.60/$6.50 on the $50 call just before midday in New York. Finally, one options player prepping for shares in IPGP to extend gains snapped up 150 calls at the Oct. $65 strike this morning for an average premium of $1.28 each. The call buyer stands ready to profit at expiration should the stock rally another 14% to top the breakeven point at $66.28.

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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