IB Options Brief: Wal-Mart Stores, Inc. (WMT), Complete Genomics, Inc. (GNOM) & Zynga, Inc. (ZNGA)
Bulls Snap Up Wal-Mart Weeklies As Shares Extend Gains
Today's Tickers: WMT, GNOM & ZNGA
WMT ñ Wal-Mart Stores, Inc.
Wal-Mart weeklies worked out well for some bullish traders this week. For example, buyers of the May 25 ë12 $62.5 strike call on Monday paid an average premium of $0.64 apiece for options that are now worth more than four times that amount on their final day of trading ahead of expiration. Trading traffic in call options that expire next Friday suggests some traders anticipate this same strategy could pay off next week as well. The sharp rally in Wal-Martís shares since the New York Times published a report regarding a cover up of alleged bribery in the companyís Mexico operations indicates investors have largely shrugged off the news for now, with shares in the worldís largest retailer currently trading at their highest level in more than a decade. The stock has posted double-digit gains since mid May, and added another 0.65% today to touch an intraday high of $65.50. Bullish players positioning for further gains in WMT shares stepped in this morning and purchased more than 1,500 calls at the June 01 í12 strike for an average premium of $0.69 apiece. Call buyers profit at expiration next week if shares in the retailer exceed the average breakeven price of $65.69. Wal-Martís annual shareholdersí meeting is scheduled to take place next Friday.
GNOM ñ Complete Genomics, Inc.
Options on biomedical company, Complete Genomics, Inc., have been humming with activity this week as shares in the name move sharply higher. The stock soared 42.5% to an intraday high of $3.32 this morning, taking gains in GNOM up to 101% since Monday. Call open interest levels in Complete Genomics have been on the rise this week, and some traders appear to have landed overnight paper profits on bullish positions established in the front month options. The number of open positions in the June $2.5 strike call increased more than doubled overnight to 536 contracts from 199. A portion of the fresh interest was initiated by traders buying around 170 calls for an average premium of $0.20 apiece on Thursday. The bid price currently available on the calls is $0.65, indicating traders long the calls at $0.20 each could potentially sell them today to bank significant overnight profits. Shares in GNOM are currently up 24.5% on the day at $2.90 as of 12:55 p.m. ET, but are down roughly 85.0% since June of last year.
ZNGA ñ Zynga, Inc.
Weekly call options on the social game developer attracted an influx of buyers this morning despite the impending end to the lockup period, and amid continued weakness in the shares following Facebookís IPO. Zyngaís shares are down 3.5% today to stand at $6.56, having recovered somewhat off Mondayís fresh all-time low of $6.36. The June 01 í12 $7.0 strike calls have changed hands more than 8,200 times, and it looks like most of the contracts were purchased for an average premium of $0.17 each. Call buyers could be positioning for shares in the name to rebound next week, in which case profits may be available, should shares rally more than 9.3% to trade above $7.17 at expiration. Alternatively, the long calls may be used to hedge short positions in the stock that make money if Zyngaís shares continue to pull back.
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.
View Caitlin Duffy's post archive >