IB Options Brief: Leap Wireless International, Inc. (LEAP) & Aetna (AET)

Posted April 26th, 2012 by Caitlin Duffy in Unusual Activity

LEAP ñ Leap Wireless International, Inc.
The wireless services providerís shares dropped 25.0% to an intraday low of $5.72 after the Company reported net subscriber gains were down 22.0% in the first quarter versus the same period last year. Trading traffic in the May expiry put options today suggests some traders are prepared should the selloff in Leapís shares continue in the near term. The stock is now off its lowest point of the session, though continues to trade 20.0% lower on the day at $6.16 as of 12:15 p.m. ET.

Traders positioning for shares in LEAP to extend losses in the near term snapped up more than 3,400 put options at the May $5.0 strike for an average premium of $0.21 each. Put buyers make money if shares in the pay-as-you-go wireless provider decline another 22.2% to breach the average breakeven price of $4.79 by May expiration. Leap Wireless International posted a wider-than-expected first-quarter loss after the close on Wednesday, driving shares down to their lowest intraday level since October 2011.

AET ñ Aetna
Shares in the health insurer were slammed Thursday, falling 12.2% to an intraday low of $43.34, after first-quarter earnings failed to meet analyst expectations. Front month call buyers on Aetna this morning stand ready to benefit should the shares rebound in the near term.

Traders eyeing the May $44 strike calls, where more than 1,300 contracts have traded against 23 open positions, purchased the majority of the contracts for an average premium of $1.08 each early in the session. The bullish strategy may be profitable at expiration next month if shares in the insurer rally 2.2% over the current price of $44.10 to trade above the average breakeven point at $45.08.

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