IB Options Brief: Honeywell International, Inc. (HON) & Goodrich Petroleum Corp. (GDP)

Posted October 3rd, 2012 by Caitlin Duffy in Unusual Activity

HON – Honeywell International, Inc. - Shares in diversified industrials company, Honeywell International, Inc., are up 0.15% as of 11:50 a.m. in New York to stand at $61.53, adding to gains realized earlier in the week after the company agreed to take a 70% stake in Tulsa, Oklahoma-based Thomas Russell Co. for $525 million in cash. The deal gives Honeywell the right to purchase the remainder of the closely-held company and expands its presence in the U.S. shale gas industry.

Activity in HON call options this morning suggests some traders are positioning for shares in the name to rally to fresh multi-year highs in the near term. Volume in the front month calls is greatest at the Oct. $65 strike where upwards of 2,900 contracts changed hands against open interest of 609 positions. It looks like most of the calls were purchased for an average premium of $0.14 apiece and may be profitable at expiration in the event of a 6% move to the upside in the share price to a new 52-week high of $65.14.

Bullish strategists also dabbled in November expiry options, buying around 425 of the Nov. $65 strike call and more than 540 contracts at the Nov. $67.5 strike this morning at average premiums of $0.44 and $0.13 apiece, respectively. Traders long the calls appear to be betting that shares in Honeywell are poised to rise significantly during the next six weeks. Shares in the name last traded above the $65.00-level in 1999. The company is scheduled to report third-quarter earnings ahead of the opening bell on October 19th.

GDP – Goodrich Petroleum Corp. - Options traders driving fresh interest in Goodrich Petroleum Corp. calls this morning may be positioning for shares in the Houston, Texas-based oil and gas company to rebound during the next six weeks. Shares in Goodrich, down roughly 12% year-to-date, slipped 3.2% this afternoon to $12.60 by 12:15 p.m. ET. The Nov. $15 strike call changed hands around 2,600 times early in the trading session against open interest of 76 contracts.

It looks like most of the volume was purchased for an average premium of $0.46 apiece, preparing upside call buyers to profit given a 23% spike in the underlying share price to $15.46 by November expiration. Goodrich is scheduled to present at a number of conferences in October, including the Johnson Rice Energy Conference in New Orleans today. The company’s third-quarter earnings report is several weeks away, but call buyers may be placing bullish bets on the stock prior to the quarterly release.

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