Stock Options Watch: SWY, CAKE, CSTR

SWY – Safeway, Inc. – Shares in the food and drug retailer are trading down sharply on Thursday, falling more than 18% to $23.14 during the first half of the session, after the company posted first-quarter revenue that missed analyst estimates. At least one trader who appears to have purchased front month put options on Safeway on Wednesday afternoon is benefitting from the double-digit percentage declines in the price of the underlying today. The largest increase in put open interest on SWY yesterday was the 4,566-lot jump in the number of open contracts at the May $26 strike. It looks like most of the $26 puts were purchased at a premium of $0.40 each. Traders long the contracts are benefitting from Safeway’s pain today, with premium on the $26 puts up more than six-fold at $2.55 apiece as of 11:55 a.m. in New York. Today, some options players appear to be nibbling at Safeway calls to position for the shares in Safeway to rebound somewhat in the near term. Traders picked up around 1,400 calls at the May $24 strike for an average premium of $0.94 apiece and may profit at expiration in the event that shares rally 7.8% over the current price of $23.14 to top the average breakeven point at $24.94.

CAKE – Cheesecake Factory, Inc. – Options traders who initiated bullish bets on Cheesecake Factory yesterday ahead of the restaurant operator’s first-quarter earnings release are enjoying sizable gains in the value of their positions today, with shares in the name up nearly 9.0% in the early going to touch an all-time high of $41.02. Trading traffic in the May $38 and $39 strike calls picked up speed yesterday just before 12:15 p.m. ET. It looks like one or more traders snapped up around 320 of the $38 strike calls at an average premium of $1.13 apiece, and roughly 400 of the $39 strike calls for an average premium of $0.77 each. The value of these contracts are up sharply, with premium on the $38 and $39 calls hovering around $2.60 and $1.75 each, respectively, as of the time of this writing. It looks like some traders are stepping in to position for Cheesecake Factory’s shares to extend gains in the near term, with around 300 of the May $40 strike calls and some 230 of the May $41 strike calls purchased in the early going at average premiums of $1.05 and $0.62 apiece, respectively.

CSTR – Coinstar, Inc. – Shares in the provider of Redbox self-service DVD and video game rental kiosks are moving higher today ahead of the company’s first-quarter earnings report after the closing bell. Options activity on the stock suggests some traders are positioning for Coinstar’s shares to rally post-earnings, with the stock currently trading higher by 3.0% to stand at $54.85 as of 12:25 p.m. ET. Front month call volume today is heaviest in the May $60 strike calls, with 1,800 contracts in play versus open interest in roughly the same amount. Time and sales data suggests much of the volume was purchased this morning for an average premium of $1.22 apiece. Buyers of the $60 strike calls stand ready to profit at expiration next month should shares in Coinstar rally more than 11% over the current level to top the average breakeven price of $61.22. The May $60 strike calls were also active last week, with around 600 contracts purchased on Friday for an average premium of $1.10 each.

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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