Options Players Sweet On Dunkin’ Brands Calls As Quiet Period Winds Down
by Option Review - September 1st, 2011 2:27 pm
Today’s tickers: DNKN, AXP, LXK & CBG
DNKN - Dunkin’ Brands Group, Inc. – Options activity on the franchisor of Dunkin’ Donuts and Baskin-Robbins quick service restaurants spiked one day before analysts are expected to initiate coverage on the company. Shares in DNKN rallied as much as 6.1% to $27.95 this morning, but cooled to $26.95 in early-afternoon trade as investors await analyst opinion on the stock. The Canton, Massachusetts-based company’s shares are currently a far-cry from the $31.94-high achieved days after the IPO, but some traders are looking to the options market to speculate on a move in that direction. More than 3,000 options have changed hands on the stock thus far in the session, which is substantial next to overall open interest of 5,439 contracts. Demand is decidedly skewed in favor of calls on Dunkin’ Brands, with roughly 7 call options trading on the stock for each single put option in play this afternoon. The wave of activity lifted options implied volatility on DNKN 9.1% to 59.18% by 1:10 pm on the East Coast.
Bullish players itching for a near-term rally in the price of the underlying snapped up calls in the front month. It looks like traders purchased at least 1,000 calls at the September $30 strike for an average premium of $0.36 a-pop. Call buyers profit if shares in the provider of frozen treats and breakfast sandwiches surge 12.65% over the current price of $26.95 to surpass the average breakeven point to the upside at $30.36 by September expiration day. Like-minded optimists hungry for a Dunkin’ rally picked up around 185 calls out at the October $30 strike for a premium of $1.00 per contract. Positive analyst coverage of the America runs on Dunkin’ donut-maker could potentially spur a sprint to buy up shares in the stock to the delight of call holders. Of course, if it turns out analysts don’t quite have a sweet tooth for ice…
Sun bulls still looking for better news using option spreads
by Option Review - April 7th, 2009 6:43 pm
Today’s tickers: JAVA, APOL, EWZ, EMR, BBBY, WYNN, CSCO, CBG, GE & AA
JAVA Sun Microsystems, Inc. – Shares continue to slide for the second day after JAVA allegedly rejected IBM’s offer of $9.40 per share because it was too low. Currently, shares have declined by more than 4.5% to $6.26. A couple of contrasting trades caught our attention as one investor played the downside and another looked for upside movement in shares. In the May contract it appears that a ratio put spread was initiated with the sale of 22,000 puts at the May 5.0 strike for 46 cents each spread against the purchase of 11,000 puts at the May 6.0 strike for 89 cents apiece. The investor receives a credit of 3 cents for initiating this trade and stands to make a maximum profit of 103 cents if shares decline to $5.00 by expiration, but would burst apart at the seams should Sun’s shares breach $3.97. Further along in the October contract, a trader hoping to see JAVA rebound put on a bullish call spread which was partially funded by the sale of put options. At the October 5.0 strike price 10,000 puts were sold for a premium of 80 cents apiece. Meanwhile, a bull call spread was established via the purchase of 10,000 calls at the October 7.0 strike for 1.15 each and spread against the sale of 10,000 calls at the October 9.0 strike price for a premium of 40 cents apiece. This optimistic strategy yields the investor a 5 cent credit because the premium enjoyed on the sale of the put options and the sale of the higher strike calls more than offsets the cost of the October 7.0 strike call options. If shares can rally to $9.00 by expiration this fall, the investor stands to gain a maximum profit of 2.00 on the call spread plus the 5 cent premium. The two trades indicate bearishness in the near-term and bullishness as we head towards the concluding months of 2009.
APOL Apollo Group, Inc. – A provider of higher education to working adults, Apollo Group has experienced a 9% drop in shares to $63.17. Apollo’s share price slipped last week after the company warned that its profit margins would likely fail to meet analyst expectations. The recent share price erosion appears to be too severe as APOL still forecasts that it will achieve a 24%…