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Reversal combinations at play in Lamar Advertising

Today’s tickers: LAMR, SVU, DIS, CHRW & OI

LAMR Lamar Advertising Company – Shares of the outdoor advertising company have remained relatively flat and currently stand at $16.92 today. LAMR appeared on our ‘hot by options volume’ market scanner after one investor appears to have taken a bullish stance on the stock in the June contract. It looks as though this individual sold about 5,100 puts at the June 12.5 strike price for an average premium of 58 cents apiece in order to fund the purchase of some 5,100 calls picked up at the June 20 strike for 1.32 each. The net cost of getting long of the calls amounts to 47 cents. In order to profit from the bullish position shares would need to rally by about 21% to the breakeven point located at $20.47 by expiration.

SVU Supervalu, Inc. – The grocery retailer has climbed by about 1% to $16.51 per share. We observed some investors taking a bullish position on the stock by selling about 1,400 puts at the June 15 strike price for about 72 cents each in order to fund the purchase of 1,400 calls at the June 17.5 strike for an average premium of 65 cents. The trade results in a 7 cent credit to the investor who is looking for shares to climb by 6% from the current price in order for the calls to land in-the-money by expiration. The same strike prices described above were also targeted by a trader who appears to have established a sold strangle by shedding approximately 3,600 puts at the June 15 strike for about 72 cents while also selling the same amount of calls for 68 cents each at the June 17.5 strike. The strangle strategy yields a gross premium of 1.40 and will be fully retained by the investor if the share price remains ‘strangled’ between the two strike prices. The trader would face losses at any share price below the breakeven to the downside at $13.60 or at any price above the breakeven to the upside at $18.90.

DIS The Walt Disney Co. – Shares have declined by about 3% to $21.20 today amid news that the entertainment company plans to obtain a 27% stake in the third most popular video website, Hulu.com. The DIS ticker jumped onto our ‘most active by options volume’ market scanner after one investor fiddled with put options in the June contract. It appears that 10,000 puts were purchased at the June 20 strike price for 90 cents apiece, adding to the existing open interest of 10,000 at that strike that look to have been bought yesterday for around the same price. Further up at the June 21 strike, 10,000 puts were sold for 1.25 each, perhaps as a vehicle to fund the purchase of downside protection at the June 20. If this is the case, the trade would effectively mimic a credit spread because the investor has received a net credit of 35 cents for today’s activity. Shares would need to remain above $21.00 by expiration so that the puts (of which he is now short 10,000) land out-of-the-money and the full 35 cent credit is retained by the trader.

CHRW C.H. Robinson Worldwide, Inc. – The freight transportation services company’s shares haves slipped slightly by more than 1% to $52.50. We observed one investor who established a ratio calendar spread in order to assume a bearish stance on the stock. This individual purchased 15,000 puts at the August 30 strike price for 34 cents per contract which was financed by the sale of 5,000 puts at the November 35 strike for 1.32 apiece. The trader receives a credit on the transaction of 30 cents (1*1.32 – 0.34*3 = 0.30). It is likely that the investor is long shares of the underlying stock and is looking to protect himself to the downside through expiration in August. The short position held at the November 35 strike will need to be closed out at some point unless the investor expects the puts to land out-of-the-money by expiration.

OI Owens-Illinois, Inc. – The manufacturer of glass containers for beverages and pharmaceuticals has climbed by more than 1% to stand at $24.71 per share. One option trader attracted our attention after establishing a put spread in the August contract. Looking for bearish movement in the stock, the investor purchased 7,500 puts at the August 20 strike price for 1.45 apiece spread against the sale of 7,500 puts at August 15 strike for 35 cents each. The net cost of the transaction amounts to 1.10 and yields a maximum potential profit of 3.90 to the investor if shares were to fall to $15.00 by expiration. Option implied volatility has come off from about 70% on Wednesday to the current value of 60%.


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