Options Activity Alert: TAP, PFE, CIEN

TAP – Molson Coors Brewing Company – Shares in the beer brewing company are on the decline today, joining the broad-based sell-off in equities as investors re-focus attention on the debt crisis in Europe and looming fiscal cliff in the U.S. with the conclusion of Tuesday’s Presidential election. Molson Coors shares are down roughly 4% as of 12:10 p.m. ET to stand at $41.48 after the company reported better-than-expected third-quarter profits, but missed revenue estimates, ahead of the opening bell this morning. One or more options traders appear to be bracing for further declines in the price of the underlying shares during the five months. It looks like strategists purchased more than 1,000 puts at the April 2013 $40 strike for an average premium of $1.90 per contract. The bearish puts may be profitable at expiration if TAP’s shares drop more than 8% from the current level to breach the average breakeven price of $38.10 at expiration next year. Shares in Molson Coors Brewing Co. last traded below $38.10 in June.

PFE – Pfizer, Inc. – Pharmaceuticals giant, Pfizer, Inc., is trading well off its lowest level of the session at present, down 0.95% at $24.26 as of 12:40 p.m. ET after earlier sliding as much as 2% to an intraday low of $23.99 on Wednesday morning. Heavy trading traffic in weekly options with two full trading sessions remaining to expiration indicates short-term bets on the stock are looking for shares to move. The bulk of the volume is in weekly calls looking for a quick rebound in the price of the underlying, though buyers did generate some traffic in the weekly puts as well. Weekly options volume is greatest in the Nov. 09 ’12 $25 strike call where upwards of 9,700 lots changed hands against open interest of 6,548 contracts. Most of the calls in play this morning appear to have been purchased for an average premium of $0.08 apiece. Buyers of these upside calls stand ready to profit at expiration this week as long as Pfizer’s shares settle above the breakeven price of $25.08. The lower Nov. 09 ’12 $24.5 strike call traded 4,750 times by 12:45 p.m. ET against open interest of 1,522 contracts. These call options were also mostly purchased, with traders shelling out an average premium of $0.11 per contract earlier in the trading day. Short-term bearish bets were established at the Nov. 09 ’12 $24.5 and $25 strikes, with upwards of 2,000 contracts in play at each strike in the first half of the session.

CIEN – Ciena Corp. – Plans announced by AT&T this morning to spend $14 billion on network expansion over the next three years sparked heavier-than-usual trading traffic in Ciena Corp. options this morning and drove shares in the name up as much as 12.75% to $14.86 in the first half of the session. The provider of networking products and services appears to have attracted buyers of downside puts, perhaps as some strategists seek to lock in the sharp rally in the price of the underlying today. The most active options by volume on CIEN are the Dec. $14 strike puts, which have changed hands more than 3,500 times against open interest of just 222 contracts. It looks like most of the volume was purchased for an average premium of $0.94 apiece in the early going, thus protecting buyers to the downside in the event shares drop 12% off today’s high of $14.86 and breach the average breakeven price of $13.06 by expiration next month. Ciena Corp. is scheduled to report fourth-quarter earnings in the first week of December.

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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