Unusual Activity
Options Intelligence Report: Fortune Brands, Inc. (FO), St. Jude Medical, Inc. (STJ) & Materials Select Sector SPDR (XLB)
Posted on 3/15/2010 in Unusual Activity by Andrew Wilkinson
Fortune Brands’ Shares Trade At New 52-Week High, Bullish Players Covet Call Options
FO – Fortune Brands, Inc.
Shares of the holding company with subsidiaries such as Beam Global Spirits & Wine, Inc., which manufactures Jim Beam whiskey and Maker’s Mark, and Acushnet Company, the producer of Titleist golf products, rallied 2.35% during the session to reach a new 52-week high of $48.45. The increase in Fortune’s share price inspired bullish options trading on the stock today.
Approximately 1,000 calls were picked up at the April $50 strike for an average premium of $0.66 apiece. But, the real action took place at the June $50 strike where nearly 15,500 calls were purchased for an average premium of $1.68 per contract. Investors holding the June $50 strike call options stand ready to amass profits only if Fortune Brands’ shares rally another 6.65% from the current day’s price to breach the breakeven point on the calls at $51.68 by expiration day in June.
STJ – St. Jude Medical, Inc.
The manufacturer of cardiovascular medical devices experienced a sharp 8.45% rally in its share price today to $40.67 on news its rival, Boston Scientific Corp., suspended sales of its implantable heart defibrillator this morning.
Options players initiated bullish transactions on the stock by selling 2,100 puts at the March $40 strike for an average premium of $0.60 apiece. Put-sellers keep the $0.60 premium per contract as long as St. Jude’s shares trade above $40.00 through expiration on Friday. However, put-players are obliged to have shares of the underlying stock put to them at an effective price of $39.40 each should the put options land in-the-money at expiration.
Optimistic investors scooped up 3,100 call options at the July $45 strike by paying an average premium of $0.77 per contract. Call-coveters are positioned to profit only if shares rally another 12.5% from the current price to breach the breakeven share price at $45.77 by expiration day in July.
XLB – Materials Select Sector SPDR
Shares of the XLB, an exchange-traded fund that tracks the performance of the materials economic sector of the S&P Composite Stock Index, declined 0.30% today to $33.19. Trading in long-dated options on the fund, however, suggests one individual is bullish on the sector through expiration in January 2011.
It appears the investor sold 10,000 put options outright at the January 2011 $27 strike for a premium of $1.32 per contract. The trader keeps the full premium pocketed today as long as shares of the underlying stock trade above $27.00 through expiration day. The short-sale of the put options indicates the investor is happy to have shares of the underlying fund put to him at an effective price of $25.68 apiece should the puts land in-the-money at expiration.
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Posted by Andrew Wilkinson | View more articles by Andrew Wilkinson
