Big Volume In Saks Options As Shares Rip Higher

Today’s tickers: SKS, USG & PFE

SKS – Saks, Inc. – Timely bullish bets initiated in Saks options just seconds prior to the closing bell on Tuesday are generating sizable gains for at least one trader today, with shares in the high-end retailer up at the highest level since 2008. The stock closed Tuesday up 11% on the day at $13.67 after the company reported first-quarter revenue above average analyst expectations. Within minutes of the close shares in SKS moved sharply to the upside after the New York Post, citing a source familiar with the matter, reported that Saks has hired Goldman Sachs Group, Inc. to explore strategic options, including a potential sale of the company. Shares gained as much as 22% over yesterday’s close to touch $16.70 in the pre-market on Wednesday. The stock currently trades up 14% on the session at $15.59 as of 11:50 a.m. in New York. Options on SKS were active throughout Tuesday’s trading sessions, but it was the last-minute flurry of call buying at the Jun $13 and $14 strikes that look rather interesting in hindsight. It looks like some 1,339 calls were purchased at the Jun $14 strike for a premium of $0.30 each, all with a time stamp of 15:59:35. Volume of 347 of the Jun $13 strike calls changed hands at 15:59:29 yesterday and look to have been purchased at $0.85 per contract. As of midday on the East Coast, the value of the Jun $13 strike calls have tripled to $2.65 each, while premium on the $14 calls has risen six-fold overnight to $1.80 per contract. Meanwhile, trades initiated on Saks today are betting the shares continue move higher, with a block of 3,000 of the Jun $15 strike calls purchased for a premium of $1.10 per contract in the early going this morning. These contracts make money if shares in Saks rally another 3.3% over the current price of $15.59 to surpass the effective breakeven point at $16.10 by June expiration.

USG – USG Corp – Shares in building materials maker, USG Corp, are on the rise today, up 4.3% at $29.00 in early afternoon trade. The stock popped up on our scanners during the first 30 minutes of the session due to heavy trading traffic in the July and August expiry call options. The company’s chairman, president and CEO, James S. Metcalf, spoke at the J.P. Morgan Homebuilding & Building Products Conference in New York at around 10:15 a.m. ET this morning. Traders appear to have purchased around 1,000 calls at the Jul $28 strike for an average premium of $1.95 apiece and more than 2,000 calls at the Aug $27 strike at an average premium of $2.90 each. Call buyers stand ready to profit in the event that shares in USG Corp rise to the highest levels since mid-March during the next few months. The Jul $28 strike calls make money if shares top $29.95 by expiration, while the Aug $27 strike calls look for shares to exceed $29.90 by August expiration. The stock reached a near five-year high of $30.97 back on February 13th.

PFE – Pfizer, Inc. – Options traders initiating near-term bullish trades on pharmaceutical giant, Pfizer, Inc., looked to weekly calls on the name straight out of the gate this morning. Shares in Pfizer jumped 4.3% at the start of the session to touch $30.04 after the company said it plans to shed its post-IPO majority stake in animal medicines and health company, Zoetis Inc. It looks like some strategists positioning for Pfizer’s shares to continue to rise this week snapped up more than 2,400 calls at the May 24 ’13 $30 strike for an average premium of $0.15 each. The weekly contracts make money if shares in Pfizer settle above the breakeven price of $30.15 by expiration. Total volume in the $30 strike calls is currently above 4,200 contracts versus open interest of 184 contracts.