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Wednesday, June 7, 2023



Netflix Tie With Apple TV Spurs Options Frenzy As Shares Take Off

Today’s tickers: NFLX, ULTA, BKC, RIG, COH, RDC & BID

NFLX – Netflix, Inc. – Call options on Netflix are in high demand today after Apple, Inc. CEO, Steve Jobs, said the new Apple TV product will allow consumers to stream movies from Netflix for the first time. NFLX shares jumped 8.5% on the news to an intraday high of $136.25 in late afternoon trading. Near-term bullish trading strategies dominated options action on Netflix today as a number of investors picked up calls and sold puts on the stock. Traders purchased approximately 1,400 now in-the-money calls at the September $135 strike for premium of $4.45 apiece. Another 1,500 calls were coveted at the higher September $140 strike at an average premium of $2.55 each. Shares in NFLX must increase another 4.6% in order for traders long the September $140 strike calls to start to accrue profits above the average breakeven price of $142.55 by expiration day. Optimists also scooped up 1,500 calls at the September $145 strike for premium of $1.57 each, and bought approximately 1,300 calls at the September $150 strike. Some put players drew a line of resistance in the sand at $130.00 and sold roughly 2,000 puts at the September $130 strike for an average premium of $4.98 apiece. Put sellers keep the full premium received as long as Netflix shares exceed $130.00 through expiration day. Otherwise, it seems these individuals are happy to have shares of the underlying stock put to them at an effective price of $125.02 each in the event the puts land in-the-money at expiration.

ULTA – Ulta Salon Cosmetics & Fragrance, Inc. – Shares of the operator of full-service salons and retail stores that sell cosmetics, fragrance, haircare and skincare products in off-mall locations earlier declined as much as 8.9% to touch down at an intraday low of $20.67. Ulta’s shares dropped sharply after analysts at Jeffries & Co. lowered their price target on the beauty products provider to $25.00 from $27.00. The stock was able to crawl its way higher throughout the session, however, and is currently down just 2.25% on the day to arrive at $22.19 as of 3:20 pm ET. Options investors populating ULTA picked up put options following the target share price revision, and ahead of the firm’s second-quarter earnings report slated for release after the closing bell tomorrow evening. Traders expecting ULTA’s shares to slip once again purchased approximately 1,800 puts at the September $20 strike for an average premium of $0.90 apiece. Put buyers stand ready to make money should the price of the underlying stock plunge 13.925% from the current price of $22.19 to breach the average breakeven price of $19.10 ahead of expiration day. Options implied volatility on the stock is up 8.1% to 60.12% ahead of earnings.

BKC – Burger King Holdings, Inc. – Shares of the second-largest U.S. hamburger chain jumped 16.65% to an intraday high of $19.19 following reports the firm may be in advanced talks to put itself up for sale to investment firm, 3G Capital, or British private equity firm 3i Group Plc. The fast-food chain’s shares are currently up 14.8% at $18.88 as of 1:15 pm ET. Speculators were quick to take a bit out of BKC options right out of the gate this morning, and have exchanged just fewer than 50,000 contracts on the stock by 1:20 pm ET. Trading traffic is heaviest in the September and October contracts with investors exchanging approximately 5.5 calls on Burger King for each single put option in action thus far in the session. The surge in demand for options on BKC coupled with increased uncertainty regarding potential buyout offers lifted the stock’s overall reading of options implied volatility 23.2% to 52.31% this afternoon. Investors hoping to see the burger maker extend gains ahead of expiration in September picked up approximately 7,800 calls at the September $20 strike for an average premium of $0.42 each. Call buyers, should they choose to hold the positions through expiration, make money if the price of the underlying stock increases 6.4% over today’s high of $19.19 to exceed the average breakeven price of $20.42. The $20 strike price was also the most heavily populated one in the October contract with more than 11,650 calls changing hands there by 1:25 pm ET.

RIG – Transocean, Ltd. – Shares of the international provider of offshore contract drilling services for oil and gas wells are trending higher this afternoon, keeping up with rallies enjoyed by a number of other industry players today. Transocean’s shares increased as much as 5.3% during the session to secure an intraday high of $53.71. The rally attracted options players to rig up near-term and longer-term bullish positions in order to prepare for shares to extend gains going forward. Investors eyeing upside potential through expiration day this morning picked up at least 1,000 calls at the September $55 strike at an average premium of $1.15 apiece. Traders long the calls make money if RIG’s shares rally another 4.5% over today’s high of $53.71 to trade above the average breakeven price of $56.16 by expiration day. Optimism spread to the January 2011 $60 strike where bulls bought roughly 1,500 calls for an average premium of $3.35 a-pop. Investors holding these contracts start to amass profits if Transocean’s shares surge 17.95% to surpass the average breakeven point to the upside at $63.35. Finally, uber-bulls scooped up another 1,800 calls at the higher January 2011 $70 strike by shelling out an average premium of $1.26 each. Traders stand ready to profit should RIG’s shares jump 32.675% to trade above $71.26 by expiration day in January.

COH – Coach, Inc. – The retailer of high-end handbags and accessories realized a more than 5.05% increase in the price of its shares today to pin down an intraday high of $37.66. Despite the substantial rally in Coach’s shares options traders are purchasing put options on the stock. Put buying has been a popular trading strategy as of late and has occurred repeatedly in recent weeks. It looks like the majority of today’s options action on Coach is the work of longer-term pessimists wary of the potential for shares to reverse course ahead of February expiration. Put players picked up roughly 5,300 puts at the February 2011 $37 strike for premium of $4.00 each. Investors buying these contracts may be building up downside protection on a long position in the underlying stock. In this scenario, protection kicks in if Coach’s shares slip beneath the effective breakeven price of $33.00 ahead of expiration day in February. Alternatively, the put purchasers could be initiating outright bearish bets because they expect the handbag maker’s shares to trade at a significantly lower price in the next six months. Investors buying puts outright stand ready to make money if shares of the underlying plunge 12.4% lower to trade below $33.00 by expiration.

RDC – Rowan Companies, Inc. – The provider of international and domestic contract drilling services attracted near-term bullish options investors this morning with the value of its shares rallying as much as 9.2% to an intraday high of $28.17. Shares in Rowan and other offshore drilling stocks are up sharply along with a 3% up-tick in oil and a 4.4% increase in the Offshore Drilling Stocks Index following the release of better-than-expected U.S. manufacturing data for the month of August. Bullish players honed in on September $28 strike calls, purchasing approximately 2,100 contracts for an average premium of $0.79 a-pop. Investors long the calls are poised to profit should Rowan’s shares exceed $28.79 ahead of expiration day this month. Shares may have also been helped higher this morning by news RDC signed a 3-year contract with Saudi Arabia’s state-owned national oil company, Saudi Aramco, for two rigs.

BID – Sotheby’s Holdings, Inc. – Shares of the auctioneer of authenticated fine art, antiques, decorative art, jewelry and collectibles shot up 7.05% in the first half of the session to touch an intraday high of $28.49. Investors expecting the price of the underlying stock to continue to appreciate through October expiration initiated bullish positions on the stock today. Plain-vanilla call buying took place at the October $30 strike where approximately 1,700 calls were picked up at an average premium of $1.35 apiece. Traders holding these contracts make money if the auctioneer’s shares rally another 10% to surpass the average breakeven price of $31.35 by expiration day in October.


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