IB Options Brief: Cooper Industries PLC (CBE) & American International Group, Inc. (AIG)

Posted May 21st, 2012 by Caitlin Duffy in Unusual Activity

CBE ñ Cooper Industries PLC
Shares in the Maynooth, Ireland-based maker of electrical products and tools rallied nearly 30.0% to a record-high of $71.73 today after diversified power management company, Eaton Corp., agreed to buy Cooper Industries in a cash and stock deal valued at $11.8 billion. Options on Cooper are more active than usual with just fewer than 800 contracts in play as of 1:00 p.m. ET versus the 90-day average options volume on the stock of 91 contracts.

Open interest in July expiry call options on CBE suggests one trader that had purchased 200 of the $60 strike contracts earlier this month now holds calls that have skyrocketed in value. Time and sales data indicate 200 of the July $60 strike call were purchased at a premium of $3.20 each back on May 8th. Less than two weeks later, these contracts now trade at triple that amount given a last-traded price of $10.50 this afternoon.

AIG ñ American International Group, Inc.
Bullish positioning in weekly options on the insurer popped this morning, along with the price of the underlying shares, following positive comments from an AIG executive at the Deutsche Bank 2012 Global Financial Services Investor conference in New York this morning. The stock rallied as much as 4.7% in the first half of the trading session to touch an intraday high of $29.66.

Short term bullish bets that shares may extend gains this week are building in the May 25 í12 $30 strike, where more than 4,600 contracts changed hands at an average premium of $0.32 apiece against open interest of 1,019 positions. Call buyers may profit at expiration in the event that AIGís shares rally another 2.2% over todayís high of $29.66 to surpass the average breakeven price of $30.32. Trading traffic overall in the insurerís options are heavily favoring calls over puts, with the call-to-put ratio currently exceeding 3.6-to-1.

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

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.