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Wednesday, May 22, 2024

Big Block Of Upside Calls Trades On XLF


Today’s tickers: XLF, SBUX & BKS

XLF – Financial Select Sector SPDR ETF – Options on the XLF are among the most active by volume this morning after a large block of upside calls changed hands in the first 45 minutes of the trading session. Shares in the ETF rose 0.70% to $15.03 earlier today, just below the three-month high of $15.06. Heavy trading traffic in the October expiry calls suggests one options market participant may be positioning for the price of the underlying to soar to a new 52-week high during the next couple of months. It looks like a block of approximately 87,000 calls were purchased at the Oct. $16 strike for a premium of $0.12 apiece. The sizable position may pay off at expiration in the event XLF shares increase 7.5% over the current price of $15.00 to exceed the effective breakeven price of $16.12. Shares in the ETF last traded above $16.12 in May 2011.

SBUX – Starbucks Corp. – Shares in Starbucks are continuing to recover today, with the stock up better than 2.6% on the session at $47.67 just before 11:30 a.m. in New York, on the heels of a rough patch that saw the price of the underlying slide 30% from a record high of $62.00 in April down to a six-month low of $43.04 in August. Options activity on the seller of Frappaccino Blended Beverages, Bistro Boxes and various baked goods today suggests some traders are positioning for the recovery story to continue to play out, at least through the end of this week. Fresh interest in upside calls is heaviest at the Aug. $48 strike this morning where 2,400 calls changed hands against open interest of 492 contracts. It looks like most of the call options were purchased for an average premium of $0.29 apiece, thus positioning buyers to profit should SBUX shares rally another 1.3% to exceed the average breakeven price of $48.29 at expiration this week. Shares in Starbucks Corp. increased as much as 3.3% earlier to an intraday high of $47.96, expanding the stock’s two-week rally to 11% off the August 2nd low of $43.04.

BKS – Barnes & Noble, Inc. – Bearish options are in play on bookstore operator, Barnes & Noble, Inc., after the stock was downgraded to ‘Hold’ from ‘Buy’ at Stifel Nicolaus. Shares in the maker of the Nook e-reader dropped as much as 6.5% in the first half of the session to $12.45, the lowest since April. The most heavily traded contracts on the bookseller this morning suggest the shares may continue to sell off in the near term. Traders positioning to profit from potential double-digit declines in the price of the underlying picked up roughly 2,000 puts at the Sept. $12 strike for an average premium of $0.88 apiece. Put buyers profit in the event shares in BKS decline 11% to breach the average breakeven price of $11.12 by October expiration.


Caitlin Duffy

Equity Options Analyst

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