GIS - General Mills, Inc. – Call options on the manufacturer of branded consumer foods are active this afternoon after CNBC’s David Faber mentioned Nestle could be interested in purchasing the company. Options implied volatility on General Mills shot up 18.5% to 24.20% following Faber’s comments. GIS shares are currently down just 0.20% on the day to stand at $35.18 as of 3:10 pm ET. Options traders who are perhaps hoping the speculative chatter fuels a rally in the price of the underlying stock purchased 1,100 calls at the September $37 strike for an average premium of $0.18 each. Bullish sentiment spread to the October contract where investors scooped up 1,100 in-the-money calls at the October $35 strike for an average premium of 1.32 a-pop. Traders long the October $35 strike contracts start to make money if General Mill’s shares rally above $36.32 ahead of expiration. Bulls looking for a more significant upward move in share price picked up roughly 3,000 call options at the higher October $37.5 strike for an average premium of $0.37 apiece. Investors may accumulate profits if, by expiration day, the food maker’s shares jump 7.65% to surpass the average breakeven point at $37.87. Finally, options optimists paid an average premium of $0.17 per contract to take ownership of approximately 1,000 calls at the October $39 strike. Profits on the October $39 strike call options start to amass if GIS shares surge 11.3% to trade above the average breakeven point at $39.17 by October expiration.
RHT - Red Hat, Inc. – Shares in software company, Red Hat, Inc., rallied as much as 4.5% during the trading session to secure an intraday- and new 52-week high of $34.75 on news the firm may be selected to fulfill an 8-year contract worth $2 billion with the Social Security Administration. The seller of the Linux operating system popped up on our ‘hot by options volume’ market scanner late in the trading day due to October contract put activity. Investors traded more than 10,000 puts at the October $34 strike for an average premium of $2.18 each. It looks like at least 4,000 of those contracts were purchased. Perhaps put buyers are locking in gains and building up downside protection lest Red Hat fail to ultimately win the large contract. Traders buying the puts outright because they expect shares to retreat ahead of October expiration make money if the price of the underlying stock falls 7.5% from the current price of $34.41 to breach the average breakeven point to the downside at $31.82. A large portion of the put options traded to the middle of the market. Some of these contracts may have been initiated by sellers pocketing available premium in the expectation RHT’s shares will hold above $34.00. Put sellers in this scenario are happy to have the software company’s shares put to them at an effective price of $31.82 should the puts land in-the-money at expiration. Options implied volatility on the stock is up 7.9% to 43.55% with 30 minutes remaining ahead of the closing bell.
IGT - International Game Technology – Options traders placed near-term bullish bets on the manufacturer of electronic gaming equipment today. Shares of the Reno, NV-based company earlier increased 1.40% to touch an intraday high of $15.16. The stock currently stands a scant $0.53 above its 52-week low of $14.63 achieved just yesterday. But, investors populating the September contract appear hopeful that IGT’s shares will resist descending to new lows going forward, at least through expiration day next month. Optimistic players sold 1,775 puts at the September $14 strike to take in an average premium of $0.15 apiece. Put selling action spread to the higher September $15 strike where at least 2,000 lots sold for an average premium of $0.53 each. Investors short the September $15 strike put options keep the full $0.53 premium per contract as long as the gaming equipment maker’s shares exceed $15.00 through expiration day. Traders could wind up have a large number of IGT shares put to them at an effective price of $14.47 a-pop if the puts land in-the-money at expiration.
CVBF - CVB Financial Corp. – The bank holding company for Citizens Business Bank popped up on our scanners after one options strategist purchased a large chunk of put options in the October contract. Shares in CVB Financial declined as much as 2.2% to $7.03 thus far in the session, but the investor observed posturing in put options on the stock is looking for the price of the underlying to fall significantly lower by expiration day. The pessimistic player picked up approximately 26,000 puts at the October $5.0 strike for an average premium of $0.40 apiece. The outright bearish bet yields profits to the investor if shares plummet 34.5% from today’s low of $7.13 to first shatter the existing 52-week low of $6.61, and ultimately breach the effective breakeven price of $4.60 by expiration in October. The massive opening purchase of puts fueled a 26.8% run up in the stock’s overall reading of options implied volatility to 100.77% by 12:00 pm ET.
PFG - Principal Financial Group, Inc. – A large bullish position was initiated on the provider of financial services and insurance products this morning, suggesting one options strategist is positioning for a significant rally in the price of the underlying stock through October expiration. PFG’s shares are up 1.2% at $22.30 as of 11:25 am ET. Shares may have been helped higher following news that U.S. life insurance sales rose 7% in the past 3 months. One optimistic trader purchased 17,500 calls at the October $25 strike for an average premium of $0.375 per contract. The investor makes money on the transaction if Principal Financial Group’s shares jump 13.8% in the next couple of months to trade above the average breakeven price of $25.375 by expiration day. PFG’s shares last traded above $25.375 back on August 3, 2010.
SCHW - Charles Schwab Corp. – Shares in Charles Schwab fell as much as 2.3% to touch down at an intraday and new 52-week low of $13.18 in morning trading after the financial services firm was cut to ‘equal weight’ from ‘overweight’ at Morgan Stanley. Options traders flocked to the March 2011 contract and initiated bearish positions to prepare for Schwab’s shares to hit new lows ahead of expiration. Investors scooped up at least 9,500 puts at the March 2011 $13 strike for an average premium of $1.40 a-pop. Put buyers are poised to profit should the price of the underlying stock plunge 12.00% lower to breach the average breakeven price of $11.60 by March expiration. The spike in demand for put options on Schwab today coupled with the downgrade boosted the stock’s overall reading of options implied volatility 6% to 34.69% as of 11:40 am ET.
BMY - Bristol-Myers Squibb Co. – The pharmaceutical company’s shares are down 0.85% to stand at $25.86 as of 12:05 pm ET, but it looks like a number of options investors are betting on a near-term rebound in the price of the underlying stock. Optimists purchased approximately 6,000 calls at the September $27 strike for an average premium of $0.25 apiece. It looks like today’s call buyers are adding to long call open interest at that strike initiated by like-minded traders who picked up about 8,000 lots during Wednesday’s session. Investors long the September $27 strike calls are positioned to accumulate profits should BMY’s shares surge 5.4% to exceed the average breakeven price of $27.25 by expiration day next month. Options implied volatility on the stock jumped 9.9% to 25.73% by 12:10 pm ET.
