Today’s tickers: YUM, INTC, CBRL, CASY, RMD, PG & STEC
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.
CASY – Casey’s General Stores, Inc. – Shares of the operator of convenience stores located in nine Midwestern states slipped slightly by 0.25% in the first half of the trading session to stand at $35.75 by 12:00 pm (ET). Casey’s General Stores’ shares are perhaps lower today after the firm reiterated its recommendation that shareholders not tender their shares into Alimentation Couche-Tard Inc.’s $36.00 per share extended offer. One options investor expecting Casey’s shares to continue to decline ahead of August expiration purchased a plain-vanilla debit put spread on the stock. The trader picked up 3,419 puts at the November $35 strike for a premium of $1.90 each, and sold the same number of puts at the lower November $30 strike for a premium of $0.60 apiece. Net premium paid to purchase the spread amounts to $1.30 per contract. Thus, the bearish strategist is prepared to make money as long as CASY’s shares fall 5.7% from the current price of $35.75 to breach the effective breakeven point on the spread at $33.70. The investor walks away with maximum potential profits of $3.70 per contract should shares of the underlying stock plunge 16.1% from the current price to trade below $30.00 by August expiration day. The overall reading of options implied volatility on the stock dropped 10.1% during the session to stand at 19.43% as of 12:10 pm (ET).
RMD – ResMed Inc. – A thee-legged bearish options transaction pushed the manufacturer and distributor of medical equipment for treating, diagnosing and managing sleep-disordered breathing and other respiratory disorders onto our ‘hot by options volume’ market scanner this morning. The strategist responsible for enacting the pessimistic play essentially sold call options to finance the purchase of a debit put spread in order to prepare for shares of the underlying stock to decline ahead of August expiration day. RedMed’s shares are currently trading higher by 1.1% to stand at $65.65 as of 12:15 pm (ET). The bearish trader purchased 1,000 puts at the August $60 strike at a premium of $1.00 apiece, sold 1,000 puts at the lower August $55 strike for a premium of $0.25 each, and sold 1,000 calls at the August $70 strike at a premium of $100 a-pop. The investor pockets a net credit of $0.25 per contract on the transaction, and keeps the full amount as long as RedMed’s shares fail to rally above $70.00 ahead of expiration day next month. Additional profits accumulate if the medical equipment manufacturer’s shares fall 8.60% to trade below $60.00 by expiration. Maximum potential profits, including the credit received today, of $5.25 per contract are available to the options strategist should RedMed’s shares plummet 16.2% to trade at or below $55.00 by expiration day in August.
PG – The Procter & Gamble Co. – Options investors are augmenting bullish stances on the global provider of branded consumer packaged goods today with shares of the underlying stock inching 0.25% higher to stand at $61.91 by 12:25 pm (ET). It looks like bullish players expecting PG’s shares to rally significantly by expiration purchased some 18,100 calls at the August $65 strike for an average premium of $0.22 apiece back on Thursday July 8, 2010. Today, options optimists continued this trend by picking up approximately 16,500 calls at the August $65 strike for an average premium of $0.25 per contract. Investors buying the August $65 strike calls today are poised to profit should PG’s shares surge 5.40%, surpass the current 52-week high on the stock at $64.58, and finally trade above the average breakeven price of $65.25 by expiration day next month. The increase in investor demand for call options on the stock lifted Procter & Gamble’s overall reading of options implied volatility 4.1% to 18.33% as of 12:30 pm (ET).
STEC – STEC Inc. – An upgrade of the provider of enterprise-class Flash solid-state drives to ‘buy’ from ‘hold’ at ThinkEquity LLC this morning catalyzed a 7.00% rally in the price of STEC’s shares to an intraday high of $15.78. But, it seems the sharp rally was short-lived with the price of the underlying shares currently up just 0.40% to stand at $14.81 as of 12:35 pm (ET). Investors expecting the increase in share price to last earlier purchased July contract call options to position for continued appreciation ahead of expiration on Friday. Bullish players picked up 1,100 calls at the July $15 strike for an average premium of $0.68 apiece, thus positioning buyers to profit should STEC’s shares trade above $15.68 by July expiration day. Optimism spread to the higher July $16 strike where 1,100 calls were purchased at an average premium of $0.23 each. Call buyers at this strike price make money if STEC’s shares surge 9.6% over the current price of $14.81 to trade above the effective breakeven point to the upside at $16.23 by expiration day. Options implied volatility on the stock jumped 11.5% to 72.20% just before 12:45 pm (ET).