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Saturday, February 24, 2024

Bearishness Detected In U.S. Bancorp Options

Today’s tickers: USB, V, USG & CHS

USB – U.S. Bancorp – Financials extended gains Thursday and appear on track to wrap up the week on a positive note. Shares in U.S. Bancorp joined in on the rally to trade 1.75% higher at $27.28 as of 12:05 PM in New York, though its shares haven’t climbed quite like those of sector heavyweights Citigroup, JPMorgan and Bank of America today. Earlier in the week we noted a bearish transaction on USB in the Mar. 2012 contract that appeared to be the purchase of 10,000 $28 strike calls tied to the sale of 320,000 shares of the underlying. The position may be profitable if shares in U.S. Bancorp pull back ahead of expiration. Today, it looks like a different bearish strategy was initiated in USB call options. One trader sold 5,000 calls outright at June 2012 $32 strike within minutes of the opening bell this morning to pocket premium of $0.43 per contract. The investor responsible for the trade walks away with the full amount of premium in hand as long as shares in USB fail to rally above $32.00 at expiration day. If the trader holds no position in the underlying, he or she is naked short the call options and may start to lose money in the event that USB’s shares soar 18.9% in the first half of 2012 to exceed the effective upper breakeven price of $32.43 at June expiration. U.S. Bancorp reports fourth-quarter earnings on January 18, 2011.

V – Visa, Inc. – The near-term prospects for shares in Visa, which today rallied to a fresh high of $101.97, are good according to investors initiating bullish positions in options-land this morning. The global payments technology company’s call options are quite active, with more than 3.5 calls changing hands on the stock for each single put in play thus far in the session. It looks like traders snapping calls with one week remaining to expiration are gearing up for shares in Visa to continue to hit new highs before the end of the calendar year. Investors picked up some 730 calls at the Dec. ’30 $105 strike for an average premium of $0.21 apiece, and may profit at expiration in the event that Visa’s shares rally another 3.2% to exceed the average breakeven price of $105.21. Bullish sentiment extended to the $105 strike calls set to expire in January 2012, where more than 6,700 contracts changed hands against open interest of 4,423 positions. It appears the majority of the calls were purchased by investors at an average premium of $1.06 each. Call buyers stand prepared to profit should Visa’s shares climb 4.0% to top $106.06 by expiration next year.

USG – USG Corp. – Shares in the manufacturer and distributor of building materials extended gains enjoyed earlier in the week today to trade 4.5% higher on Thursday afternoon at $10.00. The stock attracted heavier-than-usual options activity, with much of the flow initiated by one strategist constructing sizable bullish positions in the February 2012 expiry. It looks like the investor purchased around 875 now in-the-money calls at the Feb. 2012 $10 strike for an average premium of $1.04 each. Bullish action spread to the higher Feb. 2012 $12 strike where the trader picked up more than 3,900 call options for an average premium outlay of $0.37 a-pop. Profits may be available to the call buyer on these positions in the event that shares in USG Corp. rally 10.4% and 23.7% to surpass the average breakeven prices of $11.04 and $12.37, respectively, by expiration in February. Finally, the Feb. 2012 $13 strike calls changed hands roughly 3,000 times in the first half of the trading session, but much of the volume traded to the middle of the market. The far out-of-the-money calls traded at an average premium of $0.15 each. USG Corp. is scheduled to report fourth-quarter earnings ahead of the opening bell on January 25, 2012.

CHS – Chico’s FAS, Inc. – The retailer of women’s apparel and accessories under the Chico’s, White House|Black Market and Soma Intimates brand names popped up on our scanners this morning due to bullish activity in May 2012 contract call options. Shares in Chico’s had started the session in rally-mode, gaining nearly 2.0% to $10.83 after Citigroup raised their price target on the retailer to $12.00 from $11.00., although the stock has since slipped 0.30% lower on the day to arrive at $10.60 as of 11:45 AM in New York. It appears one or more bullish players purchased more than 1,500 calls at the May 2012 $11 strike for an average premium of $1.14 apiece in the first hour of the session. Investors long the calls may profit at May expiration if shares in CHS jump 12.1% to exceed the average breakeven price of $12.14.


Caitlin Duffy

Equity Options Analyst

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