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Options In Play On Fairway Ahead Of Earnings

Today’s tickers: FWM, APA & JCP

FWM – Fairway Group Holdings Corp. – Shares in food retailer, Fairway, are up slightly on Wednesday, trading 0.20% higher on the session at $20.92 as of 11:25 a.m. ET ahead of the company’s fourth-quarter earnings report on Thursday before the open, Fairway’s first quarterly release since becoming a publicly traded company on April 17th. The stock gained more than 30% to close at $17.50 on its first day trading in the secondary market and has since rallied another 20% to current levels. Fairway popped up on our ‘hot by options volume’ market scanner early in the trading session after one trader purchased front month puts on the stock. It looks like the strategist is bracing for shares in FWM to potentially drop after earnings, buying 40 of the Jun $20 strike puts for a premium of $0.70 per contract. The trade makes money if shares in Fairway decline more than 7.0% from the current price of $20.92 to breach the effective breakeven point on the downside at $19.30 by June expiration. Shares in Fairway last week touched a record high of $22.50.

APA – Apache Corp. – An upgrade to ‘Buy’ from ‘Hold’ with a target share price of $105.00 from $90.00 at Deutsche Bank helped lift shares in Apache this morning, with the stock rising as much as 2.3% during the first half of the session to $86.31.Weekly options in play on Apache today, however, suggests some traders are positioning for the price of the underlying to surrender today’s gains and then some during the next couple of sessions. The energy company’s shares have rallied sharply in recent weeks, up better than 25% in the past six weeks since touching down at a 52-week low of $67.91 on April 22nd. Near-term bearish options are most active at the Jun 07 ’13 $82.5 strike where upwards of 2,000 puts have changed hands against open interest of 259 contracts. It looks like most of the volume was purchased in the early going for an average premium of $0.17 each. Put buyers stand ready to profit at expiration this week should shares in Apache drop more than 4.0% to settle below the breakeven point at $82.33.

JCP – J.C. Penney Co., Inc. – Department store operator J.C. Penney Co.’s shares are in positive territory today, up as much as 4.3% to $18.73 at the start of the session. The stock is well off earlier highs in early afternoon trading to stand 0.20% higher on the day at $18.00 as of 12:15 p.m. in New York. Options traders anticipating a strong end to the week for shares in JCP appear to be buying the Jun 07 ’13 $19 weekly calls, with some 2,900 contracts in play versus open interest of 741 contracts as of the time of this writing. Time and sales data indicates most of the calls were purchased in the early going for an average premium of $0.22 each. Call buyers may profit at expiration this week in the event of a more than 6.5% move to the upside in J.C. Penney’s shares over the current price of $18.00 to top the average breakeven point at $19.22.


Caitlin Duffy
Equity Options Analyst

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