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AT&T Call Volume Jumps As New Trading Year Begins

Today’s tickers: T, PAYX, LXK & THRX

T - AT&T Inc. – A large bullish position initiated in AT&T call options this morning indicates at least one strategist expects shares in the wireless provider to near their highest of the past 52 weeks. The stock rose 0.85% to $30.49 in the first half of the first trading session of 2012. Options volume on AT&T is heaviest at the Feb. $31 strike, where more than 26,000 call options changed hands against open interest of 6,174 contracts. The bulk of the volume was purchased in one block of roughly 20,400 calls at a premium of $0.26 each. The call buyer may profit at expiration next month in the event that shares in AT&T rally another 2.5% to surpass the breakeven price of $31.26. The wireless provider is scheduled to report fourth-quarter earnings ahead of the opening bell on January 26.

PAYX - Paychex, Inc. – A burst of call and put activity on Paychex in the first hour of trade in the New Year suggests the price of the underlying is likely to make big moves ahead of February expiration. Shares in the provider of employee benefits outsourcing solutions to small and medium sized businesses rose 1.65% to stand at $30.61 as of 11:40 AM ET. Likely the work of one investor, it appears both calls and puts were purchased on Paychex this morning in anticipation of increased volatility in the share price. It looks like the trader purchased roughly 4,000 calls at the Feb. $31 strike for an average premium of $0.62 each, and purchased around 2,650 in-the-money puts at the same strike at a premium of $1.20 apiece. The transactions were not marked as a spread or straddle, but the implications of each position are similar to those of a long straddle. The long calls prepare the trader to profit in the event that shares in PAYX climb 3.3% to exceed the average breakeven price of $31.62, while the long puts pay off if the price of the underlying declines 2.6% to breach the lower breakeven point at $29.80 at expiration. Call options purchased on Paychex is greater than puts purchased on the stock today. Another 240 calls were picked up at the higher Feb. $32 strike at a premium of $0.25 each at roughly the same time as the trades at the Feb. $31 strike.

LXK - Lexmark International, Inc. – Fresh prints in Lexmark put options this morning may be the work of an investor taking a bearish stance on the stock ahead of the Company’s fourth-quarter earnings report on January 31. Shares in the provider of printing equipment and solutions joined in on the broad market rally, rising 2.75% to stand at $33.98 by 12:30 PM on the East Coast. It looks like the strategist purchased a 1,750-lot Feb. $29/$33 bear put spread at an average net premium of $1.14 each. The transaction positions the investor to profit if Lexmark’s shares drop 6.2% to breach the effective breakeven point on the spread at $31.86. Maximum potential profits of $2.86 are available to the trader should shares plunge 14.7% to settle below $29.00 at expiration day in February. Shares in LXK last traded below $29.00 back on October 26.

THRX - Threvance, Inc. – Shares in the biopharmaceutical company are bucking the broad market rally today, dropping 7.6% to $20.42 by 12:10 PM in New York, even as the major averages move higher to start the New Year off with a bang. Put buying by one investor may mean the decline in the drug maker’s shares are only just beginning to embark on a far sharper pullback that could see the price of the underlying plunge to its lowest since September 2010. The bearish player appears to have purchased the majority of some 2,000 puts exchanged at the Feb. $15 strike for an average premium of $1.10 each. The investor may profit at expiration next month if shares in THRX plummet 31.9% to trade below $13.90. Threvance is scheduled to present at 30th Annual J.P. Morgan Healthcare Conference in San Francisco next Wednesday, and the Company’s fourth-quarter earnings report is expected to be released after the close of trading on February 14.

 

Caitlin Duffy

Equity Options Analyst


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