Stock Options Watch: LVS, ARUN, PLCE

LVS – Las Vegas Sands, Inc. – U.S. stocks rebounded this morning on better-than-expected earnings from Hewlett-Packard and AIG released Thursday, and following market-soothing comments from St. Louis Fed Chief, James Bullard, to CNBC’s Squawk Box on Friday morning. Shares in casino resort operator, Las Vegas Sands, joined in on the end-of-week rally, rising as much as 2.5% in the early going to touch $50.32. Heavy trading traffic in May expiry call options this morning suggests some traders are positioning for shares in the name to extend gains during the next few months. The May $52.5 strike calls are seeing the most volume, with more than 21,000 contracts in play versus open interest of 282 contracts as of 11:45 a.m. ET. It looks like most of the calls were purchased for an average premium of $2.04 each. Fresh interest is also building in the May $50 strike calls where roughly 4,700 contracts appear to have been purchased for an average premium of $3.10 apiece. Traders long the May $50 and $52.5 strike calls may profit at expiration should shares in LVS rally approximately 6.0% and 9.0% to exceed average breakeven points at $53.10 and $54.54, respectively. Finally, one or more bullish traders appear to be buying the May $50/$60 call spread for an average net premium of $2.65 per contract. The bull call spread pays off if shares in Las Vegas Sands top the breakeven price of $52.65 by May expiration, with maximum potential profits of $7.35 per contract available if the stock jumps to a record high of $60.00.

ARUN – Aruba Networks, Inc. – Shares in Aruba Networks jumped nearly 30% on Friday morning to a new 52-week high of $26.78 after the provider of enterprise mobility solutions reported better-than-expected second-quarter earnings and sales, and forecast third-quarter revenue above analyst estimates. A sizable bullish bet initiated on Aruba ahead of the company’s earnings release is paying off for one trader today, as shares sit at their highest level since July 2011. The strategist appears to have purchased a 1,850-lot Mar. $22/$24 call spread yesterday afternoon, and sold the same number of Mar. $17 puts, reducing the net cost of the three-legged trade to $0.35 per contract. The strategy positioned the trader to make maximum potential profits of $1.65 per contract given a 15% move higher in the stock to $24.00 from a share price of around $20.90 at the time of the transaction by March expiration. Shares today trade well above the $24.00 level.

PLCE – Children’s Place Retail Stores, Inc. – Put options on the specialty retailer of children’s apparel and accessories are active today, with shares in Children’s Place down 3.0% on the session at $48.73 as of 12:25 p.m. in New York. The stock is up 12% since the start of 2013, but some options players appear to be positioning for the price of the underlying to surrender recent gains during the next few weeks. Children’s Place reports fourth-quarter earnings next month. Approximately 1,000 Mar. $47.5 strike puts changed hands on PLCE during the first half of the trading day against open interest of 211 contracts. Time and sales data suggest most of the volume was purchased for an average premium of $1.33 apiece, thus positioning buyers of the contracts to profit in the event that the retailer’s shares slump 5.3% from the current price of $48.73 to breach the average breakeven point on the downside at $46.17 by March expiration.

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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