VRA – Vera Bradley, Inc. – A sizable trade in Vera Bradley call options today appears to be bullish on shares of the handbags and accessories retailer through November expiration. Shares in VRA, down roughly 20% since this time last year, slipped 2.4% to a fresh 52-week low of $18.67 today. The company reports second-quarter earnings after the close on Wednesday.
The most-traded contracts are the Nov $20 calls, with volume topping 3,400 contracts versus open interest of 505 contracts. Most of the volume traded in a block of 1,900 calls at an asking premium of $1.20 per contract. The position starts making money if shares in Vera Bradley rally 13% over today’s low of $18.67 to exceed the breakeven point at $21.20. Overall options volume of around 5,100 contracts traded on the stock today is more than 10 times VRA’s average daily volume of approximately 470 contracts.
LULU – Lululemon Athletica, Inc. – Shares in the maker of yoga and athletic apparel are on the rise today, up as much as 4.6% during the session to $72.71 after the stock was initiated with a ‘Buy’ rating and price target of $90.00 at Citigroup. The retailer reports second-quarter earnings ahead of the opening bell on Thursday.
The stock attracted heavy volume in put options, with the put/call ratio dancing near 2.2 as of the time of this writing. Overall options volume on LULU is above 18,600 contracts just before 3:00 p.m. ET, roughly twice the stock’s average daily options volume of around 9,300 contracts. Some options traders appear to be bracing for the price of the underlying to pull back after earnings. Roughly 2,000 of the Sep 13 ’13 $72.5 strike weekly puts were purchased this morning, with most of the contracts picked up at a premium of $3.55 each. The in the money put options may be profitable at expiration this week should shares in Lululemon drop more than 5.0% to trade below the breakeven point at $68.95.
In contrast, sellers of roughly 2,000 of the Sep 13 ’13 $65 and $67.5 strike weekly puts are positioned to reap maximum gains on those positions as long as the options expire worthless at the end of the week. Time and sales data suggests traders sold around 2,000 of the $65 strike puts for an average premium of $1.22 each, and approximately the same number of the $67.5 strike contracts at a premium of $1.71 apiece.
DAL – Delta Air Lines, Inc. – Shares in Delta Air Lines are up sharply on Monday prior to the company's inclusion to the S&P 500 Index after the closing bell Tuesday. The stock gained as much as 7.3% during the first half of the trading session to touch $21.34.
Options traders positioning for shares in DAL to extend gains in the near term appear to be buying weekly calls on the stock. Upwards of 1,000 calls traded at the Sep 13 ’13 $21 strike versus open interest of 103 contracts, with much of the volume purchased in the early going for an average premium of $0.46 each. Traders long the $21 weekly calls stand ready to profit at expiration should shares in Delta settle above the average breakeven price of $21.46. It looks like buyers are also stepping in to get long the Sep 13 ’13 $21.5 strike calls for an average premium of $0.22 apiece. The $21.5 strike calls may be profitable at expiration in the event that DAL shares rally another 1.8% to top $21.72.
Heavy trading in Delta call options today has pushed the call/put ratio to 5.85 just before midday in New York. Overall options volume is running above 17,000 contracts at present versus the stock’s average daily volume of approximately 14,000 contracts.
FIO – Fusion-io, Inc. – Shares in Fusion-io are soaring this morning, up 20% at a one-month high of $13.07, after Western Digital Corp announced it has entered into a definitive merger agreement with competitor Virident Systems, Inc. HGST, a wholly owned subsidiary of Western Digital, will acquire Virident for approximately $685 million in cash, according to a press release issued by Western Digital.
The spike up in Fusion shares sparked heavier than usual trading in FIO options today, driving volume up to 19,100 contracts by 11:30 a.m. ET versus the stock’s average daily volume of around 3,100 contracts. Much of the trading traffic is in FIO calls, with the call/put ratio hovering near 4.4 as of the time of this writing. Despite the sharp move in the price of the underlying today, Fusion-io’s shares are still down more than 50% since this time last year.
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