Stock Options Watch: KKD, GE, RAD

KKD – Krispy Kreme Doughnuts, Inc. – Options on Krispy Kreme are more active than usual on Thursday ahead of the company’s fourth-quarter earnings report after the final bell this afternoon. Shares in KKD slipped into negative territory earlier in the session, but have since reversed course to trade up 1.1% on the day at $15.12 as of 12:05 p.m. in New York. The doughnut maker’s shares, up nearly 60% year-to-date, have more than doubled since mid-November of 2012. Some options traders appear to be positioning for shares in Krispy Kreme to pullback after earnings. Bearish options are changing hands at the April $13 strike, with upwards of 1,800 puts in play versus open interest of 153 contracts. Time and sales data suggests much of the volume was purchased in the early going at a premium of $0.35 each. Put buyers stand ready to profit at expiration next month should shares in KKD drop 16% from the current price of $15.12 to breach the effective breakeven point on the downside at $12.65. Interest in the April $14 strike puts is on the rise as well today, with around 130 contracts purchased during morning trading at a premium of $0.60 apiece.

GE – General Electric Co. – Weekly calls in play on General Electric this morning predict shares in the name will rise to the highest level since October of 2008 during the next six trading sessions. GE shares, up better than 11% year-to-date, tacked on 0.90% today to trade at $23.70 by 11:10 a.m. ET. One or more traders anticipating fresh multi-year highs in GE’s shares in the near term appear to have purchased roughly 3,000 calls at the Mar. 22 ’13 $24 strike for an average premium of $0.10 per contract. The contracts may be profitable at expiration next week in the event that General Electric Co.’s shares rally another 1.7% over the current price of $23.70 to surpass the average breakeven point on the upside at $24.10. Call buyers may lose the full $0.10 in premium paid per contract, however, if the stock fails to top $24.00 and the options expire worthless next week.

RAD – Rite Aid Corp. – Heavy trading traffic in Rite Aid Corp. call options this morning suggests traders are preparing for shares in the drugstore chain operator to potentially increase sharply by April expiration. Bullish positions may be looking for RAD shares to move higher after the company’s fourth-quarter earnings release on April 11th after the close. Shares in Rite Aid rose as much as 5.1% to $1.84 in the early going this morning, and have rallied more than 80% off a 52-week low of $0.954 reached back in December of 2012. The stock, however, is still down more than 13% since this time last year. The most actively traded options on Rite Aid this morning are the April $2.0 strike calls, with volume in excess of 22,000 contracts in play against open interest of 8,461 lots, as of 11:40 a.m. ET. Time and sales data suggests most of the volume was purchased at an average premium of $0.15 apiece during the first hour of the trading day. Call buyers stand ready to profit at April expiration should shares in Rite Aid rally another 17% to top $2.15. The stock last traded above $2.15 back in November of 2010.

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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