Options Activity Alert: FMCN, GME, PLCE

FMCN – Focus Media Holding Ltd. – Shares in the operator of China’s largest lifestyle targeted interactive digital media network jumped 13% to $26.46 on news the company received a preliminary takeover offer of $27.00 per ADR share from a private equity group that includes FountainVest Partners and Carlyle Group LP. The initial rally has cooled somewhat, but options traders targeting Focus Media Holding Ltd. calls this morning are positioned to benefit from further upside in the shares this month and next. August expiry options are most active as the trading week gets underway, with the bulk of the volume changing hands at the $24 strike. More than 7,600 of the Aug. $24 strike calls have traded so far and it appears most of the in-the-money contracts were purchased for an average premium of $1.90 each. The $23 strike call, also squarely in-the-money at present, was purchased more than 3,100 times earlier today for an average premium of $2.90 apiece. August $25 and $26 strike calls have traded upwards of 1,000 times each as of 11:30 a.m. in New York. Trading traffic in Focus Media calls spread to the Sept. $26 and $27 strikes as more than 1,000 contracts were snapped up at each strike at average premiums of $1.65 and $0.99 apiece, respectively. Reports of the takeover offer have lifted options volume on the stock above 50,000 contracts before midday, more than five times Focus Media’s 90-day average daily options volume of 9,191 contracts.

GME – GameStop Corp. – Put options on GameStop Corp. are active today ahead of the company’s second-quarter earnings report prior to the opening bell on Thursday. Shares in the name are up 0.90% on the session at $17.90 as of 11:40 a.m. ET. The stock has had a rough first half of the year, however, down 30% since January. Put buying on the name this morning suggests some strategists are wary the price of the underlying could decline in the near term. GameStop’s shares touched down at a multi-year low of $15.32 on August 2nd but have managed to gain more than 16% in the two weeks since then. Traders preparing for the stock to potentially surrender recent gains snapped up 2,200 puts at the Aug. $18 strike for an average premium of $0.90 each. Put buyers may profit at expiration this week in the event GME shares fall 4.5% to trade below the breakeven price of $17.10. Options players also picked up 2,100 puts at the Sept. $17 strike for an average premium of $0.91 apiece. Shares in GameStop would need to drop 10% from the current level in order for put buyers to profit beneath the average breakeven price of $16.09 at September expiration.

PLCE – Children’s Place Retail Stores, Inc. – Options on children’s apparel retailer, Children’s Place Retail Stores, Inc., are more active than usual this morning ahead of the company’s August 16th second-quarter earnings report before the open. Shares in the name are down 0.25% at $49.56 as of midday on the East Coast, but one options player appears to be betting on a possible rally in the stock before the weekend. It looks like the strategist purchased a roughly 720-lot Aug. $50/$52.5 bull call spread at a net premium of $1.07 per contract. The spread positions the trader to make money should PLCE shares rise 3% to top the breakeven price of $51.07 by expiration, with maximum potential profits of $1.43 per contract should shares rally 6% to $52.50. The retailer’s shares last traded at $52.50 in April. The stock reached a 2012-low of $43.12 in mid-June before staging a 15% move to the upside during the past nine weeks.

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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