IB Options Brief: Red Robin Gourmet Burgers, Inc. (RRGB) & Rockwood Holdings, Inc. (ROC)

Posted May 17th, 2012 by Caitlin Duffy in Unusual Activity

RRGB ñ Red Robin Gourmet Burgers, Inc.
It looks like traders that sold Red Robin call options ahead of the restaurant chain operatorís disappointing first-quarter earnings report can have their burger and eat it too as shares in the name take a sharp turn to the downside. Shares in Red Robin Gourmet Burgers are off their lows of the session, trading down 11.9% at present to stand at $31.50 as of 1:20 p.m. ET.

A review of open interest in the May $35 strike call, currently at 814 open positions, suggests some 478 of the contracts were sold at an average premium of $1.38 apiece between May 3rd and May 8th. With shares in the name taking a big hit today and with expiration on the horizon, itís no surprise to see these contracts are now almost worthless. The far out-of-the-money May $35 strike call is trading at a premium of $0.05 each this afternoon.

ROC ñ Rockwood Holdings, Inc.
Shares in the Princeton, New Jersey-based chemical maker are down 5.4% at $46.25 this afternoon, but options in play on Rockwood Holdings, Inc. today suggest there could be a rebound in the shares in the next four weeks. A 500-lot June $50/$55 call spread, purchased at an average net premium of $1.10 per contract, may be a profitable strategy if Rockwoodís shares rally 10.5% to top the average breakeven price of $51.10.

Maximum potential profits of $3.90 are available on the transaction in the event that ROC shares soar 18.9% to exceed $55.00 at June expiration. Rockwood is scheduled to have its shareholder meeting tomorrow and will present at the Goldman Sachs Basic Materials Conference in 2012 on May 23rd.

--------------------------------------------------------------------------------------------

Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained from theuse of this information. Past performance is not necessarily indicativeof future results.

This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this material arenot suitable for all investors. Any opinions expressed herein are givenin good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take into accountyour particular investment objectives, financial situations or needsand is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particular circumstancesand, as necessary, seek professional advice.