IB Options Brief: Conn's, Inc. (CONN)

Posted April 3rd, 2012 by Caitlin Duffy in Unusual Activity

CONN ñ Connís, Inc.
Premiums on Connís, Inc. call options are soaring this morning to the delight of some traders that appear to have initiated bullish positions on the specialty retailer of home appliances and consumer electronics prior to the fourth-quarter earnings report. Shares in Connís jumped 20.3% to $19.83 ñ the highest intraday price since September 2008 ñ after the Company swung to a fourth-quarter profit and projected better-than-expected fiscal 2013 earnings of at least $1.20 a share.

Open interest in the April and May $17.5 strike calls suggest some traders snapped up the bullish contracts as recently as yesterday afternoon to position for shares in the retailer to pop. Front month call buyers picked up around 200 lots at the April $17.5 strike yesterday for premiums of $0.25 to $0.55 apiece. The sharp move higher in Connís, Inc. shares after earnings sent premium on the now in-the-money front month calls through the roof, with the contracts currently displaying bid/ask prices of $2.05/$2.35 as of 11:20 a.m. in New York.

One trader targeted the May $17.5 strike calls ahead of the fourth-quarter report, buying around 180 of the contracts for an average premium of $0.80 each last Tuesday. The monster rally in CONNís shares has those contracts trading at $2.55 apiece, a more than three-fold increase week-over-week.

Overall options volume of 1,083 contracts on Connís, Inc. today is up sharply over the stockís 90-day average options volume of 153 contracts. The most active contracts are the July $20 strike calls where one trader appears to have purchased roughly 165 lots for an average premium of $1.83 apiece. The call buyer may profit at expiration in the event that Connís shares rally another 10.0% over todayís high of $19.83 to surpass the average breakeven price of $21.83.

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