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Sunday, October 2, 2022


News Corp. Calls Active As Murdoch & Murdoch Meet With U.K. Lawmakers

Today’s tickers: NWSA, WFC, TGT & MAS

NWSA – News Corp. – The hours of testimony provided by Rupert and James Murdoch to U.K. lawmakers today had a positive effect on shares in News Corp., which increased 5.8% to $15.84 after the questioning ended. The phone-hacking scandal had pushed shares in the diversified global media company down roughly 18.0% in the past couple of weeks to as low as $14.76 on Monday. The future is bright for shares in News Corp. according to some optimists dabbling in January 2012 contract call options today. Calls on NWSA are far more active than puts, with investors exchanging more than 3.5 calls on the stock for each single put option. Volume is heaviest at the Jan. 2012 $16 strike where upwards of 16,200 call options changed hands against open interest of 3,679 contracts. It looks like the vast majority of these calls were purchased for an average premium of $1.46 a-pop. Call buyers profit if shares in News Corp. rally another 10.2% over today’s high of $15.84 to surpass the average breakeven point at $17.46 by expiration day next year. Trading in the Jan. 2012 $19 strike is congested, as well. Around 10,500 calls have traded at that strike so far today, with some 4,000 contracts purchased for an average premium of $0.48 apiece, and another 5,500 trading to the middle of the market. Open interest in the Jan. 2012 $19 strike call is sufficient to cover volume generated at that strike today, which may mean buyers are closing rather than opening positions. Nearly 40,000 option contracts have changed hands on the media company as of 1:15 pm in New York.

WFC – Wells Fargo & Co. – Record profits reported by San Francisco, CA-based Wells Fargo this morning pushed shares in the financial services provider up as much as 4.5% to $28.09 today, but it looks like some bearish strategists are betting the good times are unlikely to persist. WFC posted net income of $0.70 a share for the second quarter, beating analyst estimates and marking a more than 25% increase in profits over the same period last year. Trading traffic in Wells Fargo options is heaviest at the September $25 strike where more than 16,000 puts have changed hands against open interest of just 167 contracts. It looks like more than 14,000 of the puts were purchased in the first half of the trading session for an average premium of $0.49 each. Put buyers profit in the event that shares in WFC drop 12.7% off an earlier high of $28.09 to breach the average breakeven point on the downside at $24.51 at expiration in September. Investors snapped up puts at a substantial discount today given the rally in WFC shares and the 16.4% dip in options implied volatility today to 26.30%. The put options cost $0.86 each on Monday. The cheapened downside protection or speculative bearish positioning initiated on WFC today may pay off for investors if shares react negatively to any number of persistent macro issues challenging the economic recovery. Shares in WFC last traded beneath $24.51 back in October 2010.

TGT – Target Corp. – Near-term bullish investors are taking an interest in call options on the retailer of everyday essentials, apparel and home goods today with shares in Target Corp. rising 1.1% to $51.15 by 11:25 am ET. Target options attracted similar bullish action on Monday. Traders may be targeting August contract calls in anticipation of a positive earnings surprise following the company’s second-quarter report ahead of the opening bell on August 17. Investors itching for a rally in TGT shares picked up more than 5,000 in-the-money calls at the August $50 strike for an average premium of $1.95 a-pop. Call buyers profit in the event that Target’s shares increase 1.6% over the current price of $51.15 to surpass the average breakeven point at $51.95 by expiration day next month. Traders who purchased the same August $50 strike call on Monday paid an average premium of $1.65 apiece for 6,000 contracts. Target’s shares, which reached a 52-week high of $60.97 on the first trading day of 2011, lost a quarter of their value to trade at $45.65 at the end of June. Since then shares have been in recovery-mode, and call buyers should benefit if the price of the underlying stock continues to rebound.

MAS – Masco Corp. – Shares in the manufacturer of home improvement and building products increased as much as 2.9% to $11.65 today on data showing housing starts in the U.S. rose more than forecast last month to the fastest pace in 5 months. Bullish trading in Masco options suggests some investors are expecting the price of the underlying to continue to climb. The maker of faucets, cabinets and windows for the new home construction market is less than one week away from reporting second-quarter results after the final bell on July 25. MAS popped up on our ‘hot by options volume’ market scanner after traders picked up more than 3,000 calls at the August $12 strike for an average premium of $0.35 each. Bulls long the calls profit if shares in Masco Corp. rally another 6.0% over today’s high of $11.65 to surpass the average breakeven point at $12.35 by expiration day next month. Shares in MAS last closed above $12.35 on July 1. The stock yesterday hit a 6-month low of $11.14, having fallen more than 20.0% since the end of May, and more than 25.0% since February. Options implied volatility on Masco is up 6.0% to stand at 40.28% in early-afternoon trade.

Andrew Wilkinson

Senior Market Analyst


Caitlin Duffy

Equity Options Analyst

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