Stock Options Watch: GNW, EZCH, F

GNW – Genworth Financial, Inc. – Shares in Genworth Financial increased as much as 11.2% in the early going on Monday, touching a fresh 52-week high of $10.94 on the back of an upgrade to ‘sector outperform’ at Scotia Capital. The insurer’s shares have increased more than 30% since the beginning of March as investors position for the provider of mortgage guaranties to benefit from strengthening in the U.S. housing market. One options combination strategy initiated on Genworth this morning looks for shares in the name to potentially rise another 35% by September expiration. The trader appears to have sold roughly 5,400 put options at the Sep. $9.0 strike in order to offset the cost of purchasing a 5,400-lot Sep. $12/$15 strike call spread. Net premium required to initiate the bullish play netted out to zero, thus positioning the strategist to profit in the event of a near 10% upside move off today’s high of $10.94 to exceed $12.00. Maximum potential profits of $3.00 per contract are available on the position should GNW shares surge 37% to $15.00 by September expiration.

EZCH – EZchip Semiconductor Ltd. – Put options on the maker of Ethernet network processors are active this morning after Kerrisdale Capital announced a short position in the stock, sending shares in EZchip Semiconductor down more than 8.0% in the early going to an intraday low of $21.80. The shares have since rebounded sharply to trade up 0.50% on the session at $23.90 as of 12:35 p.m. ET. The most actively traded contracts on EZchip today are the Mar. $22 strike puts, with upwards of 6,200 lots in play versus open interest of 211 contracts. Time and sales data suggests most of the volume was purchased at an average premium of $0.38 apiece. The intraday recovery in shares of EZchip has not been kind to buyers of the $22 strike puts, with premium on the contracts roughly halving to $0.20 each by 12:45 p.m. ET. Traders long the $22 strike put options may profit by expiration this week if shares in EZCH drop 9.5% from the current price of $23.90 to trade below the average breakeven point on the downside at $21.62. Shares in EZchip are down roughly 45% since this time last year.

F – Ford Motor Co. – Big prints in Ford Motor Co. call options pushed the automaker onto our ‘most active by options volume’ market scanner on Monday morning, with overall volume approaching 120,000 contracts by midday in New York. Shares in Ford are up nearly 2.0% at $13.23 as of the time of this writing, helped higher today by stronger than expected Chinese retail sales reported for the first two months of the year. Trading traffic in Ford options is heaviest in short-dated contracts, with the single-largest transaction in calls expiring at the end of this week. A block of 25,000 Mar. 15 ’13 $13.5 strike calls changed hands just before 10:30 a.m. ET this morning at a premium of $0.02 per contract. Total volume in the $13.5 strike calls is up around 33,000 contracts versus open interest of just 50 lots, with the bulk of the volume likely purchased at $0.02 apiece. The Mar. 22 ’13 $13 and $13.5 strike call options are also active today, with upwards of 16,000 and 20,000 lots changing hands at each strike, respectively, and well above existing open interest levels. Finally, the Mar. 28 ’13 $13.5 strike calls attracted buyers as well, driving volume above 11,500 contracts during morning trading. It looks like traders paid an average premium of $0.09 per contract, thus positioning buyers of the upside calls to profit given a 2.7% move higher in Ford’s shares to top $13.59 by quarterly options expiration on March 28th.

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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