Stock Options Watch: CREE, SNDK, JPM

CREE – Cree, Inc. – Options on the maker of energy-efficient LED lighting products are buzzing today, with overall volume rising to more than twice the average daily level for the stock during the first half of the trading session. Shares in Cree are up more than 16% on the day at $52.15 as of 11:15 a.m. in New York. The stock gapped higher on the open after the company raised its guidance for third-quarter earnings and revenue, lifting the price of the underlying to its highest level since March of 2011. Traders positioning for further upside in shares of Cree, Inc. picked up bullish options on the stock straight out of the gate this morning. Weekly calls are attracting light volume, with notable fresh interest in the Mar. 08 ’13 $52.5 strike contracts. Traders appear to be buying the short-dated contracts at an average premium of $0.19 apiece. Call volume is substantial in the April expiry options, notably in the $52.5 strike contracts where more than 6,000 calls changed hands against open interest of just 86 contracts by 11:30 a.m. ET. One or more traders appear to have purchased the bulk of the volume for an average premium of $1.25 apiece within the first 10 minutes of the opening bell today. Initiating the bullish trades at the start of the session is paying off for buyers of the April $52.5 strike calls, with premium required to purchase the contracts having more than doubled since this morning to $2.59 by 11:35 a.m. ET.

SNDK – SanDisk Corp. – Shares in SanDisk increased 2.0% to $51.43 on Tuesday morning amid strong gains in U.S. equities and a price target increase to $70.00 from $55.00 at Susquehanna. Options activity on the provider of data storage products and solutions suggests traders are prepared for shares in the name to extend gains in the near term. Volume in SNDK options is concentrated in the weekly calls as of the time of this writing, with upwards of 3,200 lots in play at the Mar. 08 ’13 $50 strike versus open interest of 589 contracts. It looks like most of the call options were purchased at an average premium of $1.58 apiece in the early going. Buyers of the short-term bullish contracts may profit at expiration this week should shares in SanDisk settle above the average breakeven price of $51.58.

JPM – JPMorgan Chase & Co. – JPMorgan’s shares are among the biggest gainers in the Dow Jones Industrial Average today, rising as much as 2% to $50.11 on Tuesday morning to help the index of 30 stocks reach fresh record highs. One trader appears to be establishing a bullish stance on the bank by selling a large block of put options ahead of JPM’s first-quarter earnings report on April 12th. More than 25,000 put options changed hands at the April $47 strike in the early going this morning versus previously existing open interest of 5,139 contracts, and it looks like around 20,000 of those puts were sold for a premium of $0.70 apiece. The put seller keeps the full amount of premium received on the transaction as long as shares in JPMorgan settle above $47.00 at expiration. However, the strategy may lose money in the event that shares in JPMorgan decline more than 7.0% from today’s multi-year high of $50.11 to trade below the effective breakeven price of $46.30.

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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