Options Activity Alert: BKD, CHS, LMT

BKD – Brookdale Senior Living, Inc. – The operator of retirement communities and assisted living facilities may be rallying in sympathy with Sunrise Senior Living, Inc. after that company agreed to be acquired by Health Care REIT, Inc., in an all-cash deal valued at $1 billion or $14.50 a share. Brookdale’s shares are currently up better than 8% on the day and more than 25% year-to-date; trading at a fresh 52-week high of $21.52 just before 12:00 p.m. EDT. Options on BKD are far more active than usual today, with volume exceeding 2,200 contracts versus the stock’s 90-day average daily options volume of 243 contracts. Most of the trading traffic in Brookdale options is in the Jan. 2013 $20 strike put where 2,010 lots changed hands against zero open positions. Time and sales on the trading indicates one strategist sold 1,700 of the put options at a premium of $1.25 apiece in the first hour of the trading session. The put seller keeps the full amount of premium received on the transaction as long as shares in Brookdale settle above $20.00 at January expiration. The trader could wind up having 170,000 shares of the underlying put to him at an effective price of $18.75 each in the event the contracts land in-the-money at expiration.

CHS – Chico’s FAS, Inc. – Shares in women’s apparel and accessories retailer, Chico’s FAS, Inc., jumped 8.8% to a multi-year high of $18.58 after reporting better-than-expected second-quarter earnings and sales ahead of the opening bell this morning. The clothing company also raised the low end of its prior forecast for full year 2012 revenue, helping the stock rally to the highest intraday price since August 2007. Options traders positioning for shares in the retailer to extend gains during the next five months snapped up around 700 calls at the Jan. 2013 $21 strike for an average premium of $0.60 apiece today. Call buyers may profit at expiration next year should Chico’s shares soar another 16% over today’s high of $18.58 to top the average breakeven price of $21.60. Approximately 275 calls changed hands at the higher Jan. 2013 $22 strike against previously existing open interest of just two contracts. It looks like most of the volume was purchased for an average premium of $0.35 each, thus positioning buyers to profit in the event CHS shares gain 20% to exceed $22.35 at January expiration. Meanwhile, some traders who initiated bullish bets ahead of the positive earnings report saw the value of their positions rise markedly overnight. Options traders who paid an average premium of $1.20 per contract to purchase around 900 of the Sep. $16 strike calls on Tuesday now find premium required to buy the calls is up roughly 90% at $2.30 each as of 11:30 a.m. in New York trading.

LMT – Lockheed Martin Corp. – Heavier-than-usual activity in Lockheed Martin Corp. call options this morning suggests at least one option strategist is positioning for shares in the defense contractor to potentially hit a new multi-year high in the next few weeks. Shares in LMT are down 0.80% on the day at $93.01 as of 12:25 p.m. EDT, but are up approximately 13% since the start of 2012. The most active contracts on LMT thus far in the session are the Sep. $95 strike calls, which traded more than 1,800 times versus open interest of 512 contracts. It looks like nearly all off the upside calls were purchased for an average premium of $0.31 apiece earlier in the trading session. The bullish stance may pay off at expiration next month in the event Lockheed Martin shares increase 2.5% over the current level to exceed $95.31, the highest price since October 2008.

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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