Stock Options Watch: LNKD, DLTR, PZZA

LNKD – LinkedIn Corp. – Shares in the online professional networking company are soaring today, up as much as 7.0% to touch a record-high of $168.82 during the first half of the trading session on positive analyst comments. The price target on LinkedIn was raised to $200.00 from $160.00 at Evercore this morning, and the stock was rated new ‘Buy’ with a 12-month target price of $195.00 at Wunderlich Securities. LNKD shares, up nearly 40% in the past two weeks alone, have rallied more than 95% since this time last year. Options traders positioning for shares in the name to move higher this week snapped up in- and out-of-the-money weekly calls on the stock today. Traders looked to the Mar. 01 ’13 $160, $165 and $170 strikes, driving volume at each strike well above open interest levels. The $165 and $170 strike calls are the most active by volume, with upwards of 2,300 contracts in play at each as of 11:25 a.m. ET. Much of the volume appears to have been purchased at average premiums of $1.98 and $1.10 apiece, respectively. Meanwhile, nearly 1,000 call options have changed hands at the higher Mar. 01 ’13 $175 strike versus open interest of 250 contracts. Trading in the $175 calls is mixed, with roughly equal numbers of contracts purchased and sold. Buyers of around 350 of the $175 strike calls paid an average premium of $0.34 apiece in the early going, and may profit at expiration this week should shares in LNKD rally another 4.0% over today’s record high of $168.82 to surpass the average breakeven point at $175.34.

DLTR – Dollar Tree, Inc. – Upside calls purchased on Tuesday ahead of Dollar Tree’s fourth-quarter earnings report this morning landed one or more traders substantial overnight paper profits, with shares in Dollar Tree spiking nearly 14% to an intraday high of $46.71 on Wednesday morning. The largest increase in open interest on Dollar Tree overnight was in the Mar. $42.5 strike calls; a review of time and sales data from Tuesday suggests around 2,000 of the $42.5 calls were purchased yesterday for an average premium of $0.90 apiece. The big post-earnings report rally in the price of the underlying shares now finds premium on the contracts up four-fold at $3.90 as of 11:40 a.m. ET. Finally, fresh interest in the April $45 strike calls indicates some traders are prepared to benefit from continued gains in Dollar Tree’s shares during the next seven weeks. Around 1,900 in-the-money calls at the April $45 strike have changed hands against open interest of 134 contracts. It looks like most of the contracts were purchased at an average premium of $1.96 each earlier in the session. Traders long the calls stand ready to profit in the event that DLTR shares settle above the average breakeven point at $46.96 at April expiration.

PZZA – Papa John’s International, Inc. – Shares in Papa John’s are down 8.6% this afternoon at $51.78 after the company announced fourth-quarter earnings and revenue that trailed analyst estimates. The company also restated its consolidated financial statements for the years 2009, 2010, 2011 and the first three quarters of 2012 to correct an accounting error. Traders positioning for shares in Papa John’s to potentially extend losses in the near term snapped up more than 110 puts at the Mar. $50 strike for an average premium of $0.63 apiece. These contracts make money if shares in the name slump 4.65% from the current price of $51.78 to breach the average breakeven point on the downside at $49.37 by March expiration. Meanwhile, traders who appear to have sold call options on PZZA ahead of the earnings announcement may take sizable profits off the table. It looks like approximately 140 of the Mar. $60 strike calls were sold yesterday at an average premium of $0.50 each. These contracts can now be bought back at just $0.05 to $0.10 apiece as of 1:10 p.m. ET, with the stock and call option premiums down sharply today.

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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