Heavy call activity on Goodyear looks for stock to rebound

Today’s tickers: GT, PIR & LINTA

GT – Goodyear Tire & Rubber Co. – Shares in the tire manufacturer have declined nearly 15% since the start of 2013, but options activity on the stock this morning suggests some traders are positioning for the price of the underlying to rebound during the next six weeks. Goodyear’s shares are up 0.80% today at $12.26 as of 11:40 a.m. ET, after the stock last week touched down at a fresh six-month low of $11.96. Overall options volume on the tire maker is up sharply versus the stock’s average daily volume today, with trading in calls far outpacing activity in puts on the name. The May $13 strike calls are most active, with upwards of 25,000 lots in play as of midday in New York versus open interest of just 729 contracts. It looks like most of the $13 calls were purchased for an average premium of $0.35 apiece, thus positioning buyers to profit at expiration should shares in Goodyear rally 9.0% over the current price of $12.26 to top the average breakeven point at $13.35 by May expiration. Goodyear Tire & Rubber Co. is scheduled to report first-quarter earnings at the end of the month.

PIR – Pier 1 Imports, Inc. – A burst of upside call buying on home furnishings retailer, Pier 1 Imports, this morning suggests at least one trader is angling for a near-term rally in the stock. Shares in Pier 1, up 1.8% today at $22.22, have gained 20% since this time last year. Bullish bets on the specialty retailer look for shares in the name to potentially increase to fresh 52-week highs by April expiration. The April $23 strike calls attracted the most volume, with more than 1,100 lots in play versus open interest of 382 contracts. Most of the $23 strike calls appear to have been purchased at a premium of $0.30 apiece, and make money as long as shares in Pier 1 rise another 5.0% to settle above $23.30 at expiration. Pier 1 reports fourth-quarter earnings ahead of the opening bell on Thursday.

LINTA – Liberty Interactive Corp. – A large block of call options in play on Liberty Interactive Corp. this morning looks for shares in the name to rally to fresh multi-year highs by January 2014 expiration. Shares in the operator of QVC, Inc., Evite, Inc. and other digital commerce businesses are up 1.0% at $21.01 as of 12:15 p.m. ET on Monday afternoon. LINTA popped up on our scanners today after more than 10,000 calls traded at the Jan. 2014 $22 strike versus open interest of just 35 contracts. It looks like most of the contracts were purchased at a premium of $1.50 each within the first 30 minutes of the opening bell this morning. The bullish strategy pays off at expiration next year if shares LINTA rally 12% over the current price of $21.01 to surpass the breakeven point at $23.50.