IB Options Brief: Norfolk Southern Corp. (NSC) & Jefferies Group, Inc. (JEF)
NSC – Norfolk Southern Corp.
Rail transportation services provider, Norfolk Southern Corp., said Wednesday third-quarter earnings are likely to trail analyst estimates, sending the price of its shares down nearly 10% this morning to $65.58. At least one options trader is positioned for the shares to come off further.
It looks like the strategist purchased a 2,000-lot Oct. $60/$65 bear put spread at an average net premium outlay of $0.65 per contract. The spread makes money if shares in Norfolk decline another 2% off today’s low to $64.21, with maximum potential profits of $4.35 per contract available on the position in the event of an additional 8.5% adverse move in the price of the underlying to $60.00 by October expiration.
Overall options volume on Norfolk is greater than 35,000 contracts as of 12:25 p.m. ET, with more than two put contracts changing hands for each single call option in play this afternoon. The stock was cut to ‘Market Perform’ from ‘Outperform’ at Wells Fargo Securities today.
JEF – Jefferies Group, Inc.
Downside puts purchased Wednesday morning on Jefferies ahead of the firm’s third-quarter earnings report released prior to the opening bell this morning looks like it was a good move for some as shares in the name move sharply lower today.The stock fell as much as 9% on Thursday morning to touch an intraday low of $14.30 before paring losses to stand 6.5% lower on the day at $14.65 as of 12:45 p.m. in New York.
Yesterday we noted heavy put activity at the Sep. $15 strike on Jefferies, with more than 5,000 contracts changing hands in the early going. Time and sales data for the transactions suggested the put volume was mostly purchased for an average premium of $0.15 apiece.The post-earnings pullback in the price of the underlying shares now finds the price tag on the contracts has tripled overnight.
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