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Volume In Big Lots Put Options On The Rise Ahead Of Earnings

Today’s tickers: BIG, INTC & SWHC

BIG - Big Lots, Inc. – Shares in closeout retailer, Big Lots, are in negative territory this morning, down 2.6% at $35.06 as of 11:00 a.m. ET amid a down day for U.S. equities. The stock popped up on our ‘hot by options volume’ market scanner near the start of the trading session due to heavier than usual trading in September expiry puts. The Sep $32.5 strike puts are the most traded options by volume on BIG thus far in the session, with more than 2,800 lots in play versus open interest of 368 contracts. Time and sales data suggests most of the put options were purchased for an average premium of $0.77 apiece. Put buyers stand ready to profit at expiration should shares in Big Lots drop 9.5% from the current price of $35.06 to settle below the breakeven point at $31.73. Shares in BIG last traded below $31.73 on July 1st. The company’s unconfirmed second-quarter earnings release date is next Thursday, August 22nd.

INTC - Intel Corporation – Trading in weekly options on Intel is mixed this morning, with shares in the chipmaker off 2.0% to stand at $22.12 as of midday in New York. Volume in the newly issued August 23 ’13 expiry options is heaviest in the $22 puts, with more than 18,000 contracts traded thus far in the session. A look at time and sales data suggests that most of the put options were purchased for an average premium of $0.18 apiece. The near-term bearish contracts make money at expiration next week if shares in Intel decline another 1.4% from the current price of $22.12 to breach the effective breakeven point on the downside at $21.82. Conversely, fresh interest in the Aug 23 ’13 $22.5 strike calls indicates some traders are positioning for the price of the underlying to rebound during the next six trading sessions. It looks like upside call buyers snapped up around 2,200 of the $22.5 strike contracts for an average premium of $0.14 each. The bullish stance on INTC may be profitable at expiration if shares in the name rally 2.4% to exceed an average breakeven price of $22.64.

SWHC - Smith & Wesson Holding Corporation – Options on firearm manufacturer, Smith & Wesson, are more active than usual today, with shares in the name sliding as much as 10% to a three-week low of $10.95, helped lower by a downgrade to ‘Underweight’ from ‘Neutral’ at Keybanc. The stock is currently off its lows, but still down 6.75% on the session at $11.36 as of 11:40 a.m. in New York. Call options changing hands on SWHC in the early going today indicates some traders are positioning for the price of the underlying to rebound. Volume in Smith & Wesson options is heaviest in the December expiry contracts, with fresh interest building in far in-the-money calls. As of the time of this writing, upwards of 4,000 of the Dec $9.0 strike calls have changed hands against open interest of 229 contracts. Time and sales data suggests much of the volume was purchased for an average premium of $2.62 each, thus positioning buyers to profit in the event that shares in the gun maker rise 2.3% to top the average breakeven point at $11.62 by December expiration. Meanwhile, the Dec $12 calls are also active, with around 200 lots purchased at an average premium of $0.85 each during morning trading. Buyers of the Dec $12 calls may profit at expiration should shares in SWHC rise 13% to exceed the average breakeven price of $12.85. Despite the dip in Smith & Wesson shares this week, the stock is still up more than 40% since this time last year.

 

Caitlin Duffy
Equity Options Analyst


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