Stock Options Watch: CAT, QLGC, CPRT

CAT – Caterpillar, Inc. – Trading traffic in weekly call options on the world’s largest maker of machinery indicates some traders are betting Caterpillar’s shares, up 3.75% at $87.43 as of 12:50 p.m. ET on Friday, extend gains next week. Bullish bets in weekly contracts expiring next Friday are heaviest at the May 10 ’13 $87.5 and $90 strikes. Upwards of 4,000 calls changed hands at the $87.5 strike, with the bulk of the volume purchased in the early going at an average premium of $0.51 apiece. The price tag on the $87.5 weekly calls has roughly doubled to $1.03 as of the time of this writing, with the stock sitting at the highs of the session. Traders long the calls profit at expiration next week as long as CAT’s shares exceed the average breakeven price of $88.01. More than 2,000 of the $90 strike weekly calls have traded as well. It looks like most of the contracts were picked up this morning at an average premium of $0.13 each. Premium on the $90 calls expiring next Friday has also roughly doubled since this morning, with the last traded price on the contracts up at $0.25 apiece. Overall volume in CAT options is above 51,000 contracts, topping the stock’s average daily volume of around 46,700 contracts, with the call/put ratio up above 2.0.

QLGC – QLogic Corp. – Shares in QLogic are bucking the trend today, sliding more than 7.0% to $9.71 during the first half of the trading session even as the S&P 500 Index and the Dow Jones Industrial Average rally to fresh highs. QLGC had been participating in the run up in U.S. stocks earlier this year, rising nearly 25% from the start of 2013 to as high as $12.35 in mid-March. During the seven weeks since then, however, shares in the name have dropped more than 20% to the current level. QLogic’s shares slipped to a fifteen-week low today after a number of analysts lowered target prices on the stock on the heels of QLGC’s fourth-quarter earnings release on Thursday after the close. Yet, some options traders appear to be positioning for the price of the underlying to rebound during the next five months. It looks like more than 2,000 calls changed hands at the Oct $12.5 strike versus open interest of 226 contracts. Time and sales data suggests most of the $12.5 strike calls were purchased today for an average premium of $0.27 each. Call buyers stand ready to profit at October expiration should shares in QLogic surge 32% to exceed the average breakeven price of $12.77.

CPRT – Copart, Inc. – Big prints in Copart call options on Friday morning suggests one options player is positioning for shares in the provider of online vehicle marketplaces to rally significantly during the next six months. Shares in Copart are up 1.3% today at $35.81 as of 12:20 p.m. ET. The largest trades in CPRT options today were in the Nov $40 and $45 calls, where it looks like one strategist purchased a 7,000-lot bull call spread at a net premium outlay of $1.10 per contract. The call spread starts making money if shares in Copart rally 15% over the current level to surpass the average breakeven point at $41.10, with maximum potential profits of $3.90 per contract available in the event that shares surge 25% to top $45.00 at November expiration. Shares in Copart are up roughly 20% since the start of the year. The company reports third-quarter earnings at the end of May.

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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