YUM - YUM! Brands, Inc. – Traders are placing bullish and bearish bets on the operator of KFC, Pizza Hut and Taco Bell ahead of the firm’s second-quarter earnings report slated for release after the closing bell on Tuesday afternoon. YUM’s shares are up 0.97% to stand at $40.66 with 35 minutes remaining in the trading day. The overall reading of options implied volatility jumped 21.8% to 33.38% this afternoon as investors anxiously await the firm’s earnings for the second quarter. Some investors are preparing for a rally following earnings and ahead of July expiration. These optimistic individuals picked up at least 1,300 now in-the-money calls at the July $40 strike for an average premium of $1.13 apiece. Investors long the calls make money if YUM’s shares increase 1.15% to trade above the effective breakeven price of $41.13 by expiration on Friday. Bullish sentiment spread to the higher July $41 strike where 1,000 calls were purchased at an average premium of $0.57 a-pop. Traders long the higher-strike call options stand ready to accrue profits should YUM! Brands’ shares rally 2.2% to surpass the average breakeven price of $41.57 by expiration day. In contrast to the bullish behavior observed, pessimistic players purchased put options on the stock to position for disappointing second-quarter earnings from the firm. Bears bought approximately 4,900 puts at the July $40 strike for an average premium of $0.95 per contract. Put buyers make money if YUM’s shares decline 3.95% from the current price of $40.66 to breach the average breakeven point to the downside at $39.05 by July expiration.
INTC - Intel Corp. – Options investors are hard at work populating the chip maker with various trading strategies ahead of Intel’s second-quarter earnings report scheduled for release after the closing bell tomorrow. Thus far in the session more than 144,700 option contracts have changed hands on INTC with investors exchanging 2 call options on the stock for each single put option in play today. The semiconductor manufacturer’s shares are currently up 1.40% to stand at $20.53 as of 3:10 pm (ET). One options trader expecting Intel’s shares to remain range-bound through expiration in January 2012 opted to sell a strangle in the first half of the trading session. It looks like the investor sold 5,000 calls at the January 2012 $25 strike for a premium of $1.54 each in combination with the sale of 5,000 puts at the lower January 2012 $15 strike for a premium of $1.56 apiece. Gross premium pocketed by the strangle-seller amounts to $3.10 per contract. The options strategist keeps the full $3.10 per contract received on the transaction if Intel’s shares trade within the range of the strike prices described through expiration day. The short stance taken in both call and put options in this case expose the investor to losses should shares rally above the upper breakeven price of $28.10, or if shares trade below the lower breakeven point at $11.90, by expiration day.
CBRL - Cracker Barrel Old Country Store, Inc. – The operator of restaurant and retail chain, Cracker Barrel, appeared on our ‘hot by options volume’ market scanner late in the trading session after one long-term bearish options investor purchased a debit put spread in the December contract. Cracker Barrel’s shares declined 0.50% during the trading day to arrive at $47.74 just after 3:00 pm (ET). The pessimistic player positioned for continued erosion in the price of the underlying shares by picking up approximately 2,300 puts at the December $40 strike for an average premium of $1.85 apiece, and selling roughly the same number of puts at the lower December $25 strike for an average premium of $0.85 a-pop. Net premium paid to initiate the spread amounts to $1.00 per contract. The investor responsible for the transaction is prepared to profit should CBRL shares plunge 18.3% from the current price of $47.74 to breach the effective breakeven point on the spread at $39.00 by December expiration. The trader walks away with maximum potential profits of $4.00 per contract if Cracker Barrel’s shares fall 26.7% to trade below $35.00 ahead of expiration day in December.
