Options Intelligence Report: Norfolk Southern Corp. (NSC) & Office Depot, Inc. (ODP)
NSC ñ Norfolk Southern Corp.
Bullish investors piled into call options on the provider of rail transportation services in the first half of the trading session despite the 1.60% decline in the price of the underlying shares to $52.20. Options traders enacting near-term optimistic stances on the stock perhaps took action today after Norfolk Southern Corp. was rated new ëoutperformí with a 12-month target share price of $75.00 at Macquarie Research on Wednesday.
Bulls purchased approximately 4,700 calls at the July $55 strike for an average premium of $1.14 per contract. Call buyers are poised to profit should Norfolkís shares reverse course and rally 7.5% over the current price of $52.20 to surpass the average breakeven point to the upside at $56.14 ahead of July 16 expiration.
Other options strategists wary of continued erosion in the price of the underlying shares scooped up 1,100 bearish puts at the July $50 strike for an average premium of $0.80 each. Investors long the puts make money if Norfolkís shares tumble 5.75% lower to breach the effective breakeven price of $49.20 by July expiration. We note Norfolkís shares have not traded below $49.20 since February 17, 2010. Options implied volatility on the stock jumped 10.6% to 44.64% by 11:25 am (ET).
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ODP ñ Office Depot, Inc.
Investors expecting Office Depotís share price to head higher purchased in- and out-of-the-money call options on the retailer of office supplies during morning trading even though the price of the underlying stock declined as much as 2.5% to touch an intraday low of $3.94 before 11:00 am (ET) today. Plain-vanilla call buyers should pat themselves on the back because ODPís shares have since reversed course to rally more than 4.95% in the past hour to trade at $4.24 as of 11:50 am (ET).
Bullish traders scooped up more than 1,300 in-the-money calls at the August $4.0 strike for an average premium of $0.50 per contract. Investors long the calls make money if Office Depotís shares rally above the average breakeven price of $4.50 by August expiration. Longer-term optimistic individuals purchased at least 2,500 calls at the higher January 2011 $5.0 strike for a premium of $0.50 a-pop. Traders are prepared to accrue profits if the retailerís shares surge 29.7% over the current price of $4.24 to trade above the average breakeven price of $5.50 by expiration day in January 2011.
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