Options Update: Avis Budget Group, Inc. (CAR) & Forest Laboratories (FRX)
CAR ñ Avis Budget Group, Inc.
Shares of the rental car company surged 8% to $9.12 today after the firm posted third-quarter earnings of 54 cents per share. Avis Budget Group reported staggering losses of $9.91 per share in the same period last year. Option players populated the November and December contracts with fresh call trading.
It looks like some 5,100 call options were purchased at the November 10 strike for an average premium of 48 cents apiece. Next, approximately 1,000 calls were coveted at the December 10 strike for 80 cents premium. December contract call-buyers will accrue profits by expiration if shares rise at least 18.5% to surpass the breakeven price of $10.80.
FRX ñ Forest Laboratories
An interesting options strangle combination appears to have been put in place on Tuesday morning with one investor appearing to sell around 3,000 calls at the 30 strike in November and the same amount of puts at the 27.5 strike price also expiring this month. The current share price is $27.75, with the stock rebounding off last weekís $27 low.
The company announced favorable results for its constipation drug, linaclotide, in development with Ironwood Pharma. The 17-day option combination creates a gross premium of 1.10, which implies the investor sees lower volatility going forward in a more favorable post-trial environment. The share price must now remain hemmed between $26.40 and $31.10 for this trade to remain profitable and within the two strike prices in order to see the investor retain the entire premium. Implied volatility is marginally lower at 37.5% today.
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About Andrew Wilkinson
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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