Options Activity Alert: EBIX, SINA, COL

EBIX – Ebix, Inc. – Shares in the maker of insurance software products are down sharply today on reports the SEC is investigating the company’s accounting practices. The stock dropped as much as 32% earlier in the session to an intraday low of $15.26, with the shares currently down roughly 21% to stand at $17.68 as of 11:55 a.m. ET. Options on EBIX are more active than usual as some traders scramble in reaction to the big move in the price of the underlying shares. Upside call buying in the November and December expiry options suggest some traders are positioning for EBIX shares to rebound in the near term. Bullish strategists picked up around 170 of the Nov. $18 strike calls for an average premium of $1.20 apiece. These traders may profit at expiration in a couple of weeks in the event that the software maker’s shares rally 8.6% over the current price of $17.68 to top the average breakeven point at $19.20. Like-minded bulls snapped up roughly 200 calls out at the Dec. $15 strike at a premium of $2.00 each. Profits are available to buyers of the Dec. $15 strike calls as long as shares in Ebix, Inc. exceed $17.00 at expiration next month. Not all traders, however, are positioning for a recovery story to play out. Some strategists are trading bearish puts at the Nov. $15 strike, where more than 750 contracts changed hands against zero previously established positions. Meanwhile, out in December expiry puts, it looks like one trader rolled a position in downside puts to a lower striking price. The options player appears to have sold 493 puts at the Dec. $21 strike for a premium of $4.70 apiece in order to buy the same number of puts at the Dec. $15 strike at a premium of $1.70 each. The Dec. $15 strike puts make money if shares in Ebix extend losses ahead of expiration. Ebix, Inc. is scheduled to report third-quarter earnings ahead of the opening bell on Thursday.

SINA – Sina Corp. – Call options on Chinese online media company, Sina Corp., are active today ahead of the company’s third-quarter earnings this week. Shares in the name are up sharply, trading 7.5% higher on the session at $57.00 as of 12:30 p.m. ET. Some traders positioning for further gains in the price of the underlying snapped up weekly calls on the stock this morning. More than 1,100 of the Nov. 09 ’12 $62.5 strike calls changed hands in the early going against open interest of 363 contracts. Buyers of these call options stand ready to profit at expiration this week should Sina’s shares surge 9.9% to top the average breakeven price of $62.65. Call options are more active than puts on the stock ahead of earnings, with more than two calls in play for each single put traded in the first half of the session.

COL – Rockwell Collins, Inc. – The producer of aviation electronics systems popped up on our ‘hot by options volume’ market scanner this morning due to heavier-than-usual trading traffic in the Jan. 2013 expiry calls. Shares in Rockwell Collins are up 0.80% today at $54.22. The company’s Executive Vice President and COO are scheduled to present at the Goldman Sachs Industrials Conference 2012 next Wednesday morning in Boston, Mass. Trading in the most active contracts on COL this morning suggests some traders are prepared to benefit from share price appreciation during the next few months. The Jan. 2013 $55 strike call traded roughly 1,300 times this morning against open interest of 331 open contracts. The bulk of the volume appears to have been purchased for an average premium of $1.74 apiece, thus preparing buyers to profit in the event that COL’s shares rise at least 4.6% to surpass the breakeven price of $56.74 by expiration next year. The Jan. 2013 expiry options will have one trading session remaining to expiration on the 18th following Rockwell Collins, Inc.’s first-quarter earnings report expected out on January 17th.

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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