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Bulls Eye Whirlpool Call Options

 

Today’s tickers: WHR, AIG & GRMN

WHR - Whirlpool Corp. – Shares in the maker of home appliances rallied as much as 4.6% today to a new 52-week high of $88.79 after U.S. housing starts rose to the highest level since June 2008. The stock has been on a tear since the start of summer, trading up more than 60% since the end of June, and some options traders appear to be positioning for the rally to continue in the near term. Bullish players looked to the Nov. $90 and $92.5 strikes, snapping up roughly 1,000 of the $90 strike call for an average premium of $2.80 each, and purchasing around 375 calls up at the $92.5 strike price for an average premium of $1.95 apiece this morning. Call buyers stand ready to profit at expiration next month should Whirlpool’s shares rally another 4.5% and 6.4% to top average breakeven prices of $92.80 and $94.45, respectively. Traders snapping up WHR calls may also be looking ahead to the company’s third-quarter earnings report, scheduled for release prior to the opening bell next Tuesday.

AIG - American International Group, Inc. – A large put spread initiated on insurer, AIG, this morning may be the work of one strategist locking in gains on the stock on the heels of a more than 35% rally in the price of the shares since June 4th. AIG’s shares are currently up 1.6% on the day to stand at $36.93 as of 1:00 p.m. ET. The single-largest transaction in options on the insurer today, the purchase of a 13,550-lot Jan. 2013 $32/$37 bear put spread at a net premium of $1.46 per contract, profits from- or provides protection against- limited declines in the share price through January expiration. The trade makes money if shares in AIG decline 3.8% from the current level to breach the effective breakeven price of $35.54, with maximum potential gains of $3.54 per contract in the event of a 13.3% pullback to $32.00 by expiration next year. AIG’s shares last traded below $32.00 in August.

GRMN - Garmin, Inc. – A large options play established on the provider of GPS-enabled devices and products this morning appears to be a long-term bullish bet that shares in Garmin are headed higher during the next fifteen months. Shares in GRMN are down 0.75% on the session at $39.68, with two weeks remaining to the company’s third-quarter earnings report on October 31st. It looks like one trader sold roughly 3,000 puts at the Jan. 2014 $30 strike in order to partially finance the purchase of around 3,000 calls at the Jan. 2014 $45 strike, all for a net premium outlay of $0.45 per contract. The trade makes money at January 2014 expiration as long as shares in Garmin rally 14.5% to exceed the upper breakeven price of $45.45. The stock traded up to a more than three-year high of $50.67 back in May.

 

Caitlin Duffy

Equity Options Analyst


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