Options Activity Alert: HOT, VMW, ANR

HOT – Starwood Hotels & Resorts Worldwide, Inc. – Upside call buying on one of the world’s largest hotel and leisure companies today indicates some options traders are positioning for shares in Starwood Hotels & Resorts Worldwide to continue moving higher during the next couple of weeks. Shares in Starwood are up better than 2% this afternoon to stand at $54.09 as of 12:25 p.m. ET. The stock has been trending higher in recent weeks, up 7.7% since mid-November, following a sharp 18% pullback from a six-month high of $61.09 in September down to as low as $50.42 on November 15th. Options players preparing for shares in Starwood Hotels to continue to gain ground in the near term purchased 2,000 calls at the Dec. $55 strike for an average premium of $0.30 apiece. Call buyers may profit at expiration in the event that HOT’s shares rally another 2.2% over the current price of $54.09 to exceed the average breakeven point at $55.30 at December expiration. Overall options volume on the stock today is noteworthy, with nearly 9,000 contracts in play versus the Starwood’s average daily options volume of around 2,300 contracts. The bulk of the trading traffic is in upside calls, driving the call-to-put ratio up to 19-to-1 in the first half of the trading session.

VMW – VMware, Inc. – Shares in the provider of cloud infrastructure solutions are moving higher on Thursday, currently up 1.6% on the day at $91.76 just after midday on the East Coast. Bursts of front-month put buying on VMware this morning suggests one or more strategists may be locking in recent gains in the price of the underlying. Shares in the name have increased roughly 13% since the end of October. Volume in VMW options is heaviest at the Dec. $85 strike, where upwards of 5,500 puts changed hands against open interest of 1,869 contracts. It looks like most of the volume was purchased at the start of the session for an average premium of $0.95 apiece. Put buyers may be hedging long stock positions, or could be establishing outright bearish stances on the name in anticipation of near-term declines in the share price. Traders long the put options stand ready to make money on the contracts should shares in VMware drop 8.4% to breach the average breakeven point on the downside at $84.05 at December expiration. Shares in VMware last traded below $84.05 back on November 16th.

ANR – Alpha Natural Resources, Inc. – Call options on coal producer, Alpha Natural Resources, Inc., are active this morning with shares in the name trading up as much as 4% to $8.39 during the first 30 minutes of the session. As of the time of this writing, the stock has surrendered much of the earlier gains to stand 0.60% higher on the day at $8.12 as of 11:45 a.m. ET. Traders positioning for ANR shares to extend gains heading into the weekend snapped up roughly 1,000 calls at the Dec. 07 ‘12 $9.0 strike for an average premium of $0.03 apiece in the early going. Call buyers may profit at expiration this week if shares in the coal supplier jump 11% over the current price of $8.12 to exceed the average breakeven point at $9.03. Getting long weekly calls on ANR appears to have resulted in overnight paper profits for some traders who purchased approximately 6,000 contracts at the Dec. 07 ’12 $8.0 strike yesterday for an average premium of $0.11 each. The value of these calls has slipped along with the price of the underlying intraday, but still trade at a substantial premium to the average price of $0.11 per contract paid on Wednesday given the last traded price of $0.20. The strong rally in ANR shares at the start of the session saw a four-fold increase in the premium required to buy the $8.0 strike weekly calls to $0.42 per contract, the highest since these weekly options were issued.

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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