Options Intelligence Report: Saks, Inc. (SKS) & Diamond Management & Technology Consultants, Inc. (DTPI)

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Put Options Fly Off The Shelves At Saks, Inc.

SKS ñ Saks, Inc.
Frenzied put buying activity on the operator of high-end luxury retail department stores suggests some options traders are bracing for bearish movement in the price of the underlying stock to continue through September expiration. Saksí shares declined as much as 5.40% in afternoon trading to touch an intraday low of $7.17. The retailerís shares are currently down 4.6% to stand at $7.23 as of 12:50 pm ET.

                                       

Pessimistic players positioning for additional share price erosion picked up at least 4,500 puts at the September $7.0 strike for an average premium of $0.30 per contract. Put buyers make money if SKS shares fall another 7.33% from the current price of $7.23 to breach the average breakeven point to the downside at $6.70 by expiration day next month. Saksí shares last traded below $6.70 on February 16, 2010. Increased investor demand for put options on Saks contributed to the 9% increase in the stockís overall reading of options implied volatility to 54.04% this afternoon.

 


DTPI ñ Diamond Management & Technology Consultants, Inc.
Shares of the management and technology consulting firm surged 30.8% at the start of the trading session to an intraday- and new 52-week high of $12.48 on news the computer-consulting company signed a merger agreement to have accounting-services giant, PricewaterhouseCoopers, buy all outstanding Diamond Management shares for $12.50 each. Investors exchanged more than 7,600 option contracts on the stock by 12:15 pm ET, which is volume greater than overall previously existing open interest on the stock of 6,140 contracts.

Options traders focused their attention almost exclusively on the call side, buying nearly 800 lots at the October $12.5 strike for an average premium of $0.06 each. Trading traffic was heaviest at the October $10 strike where some 3,000 now deep in-the-money calls changed hands for an average premium of $2.47 a-pop. It looks like roughly 1,400 of those contracts were purchased. In-the-money call buyers make money if Diamondís shares exceed the average breakeven price of $12.47 by December expiration. The stockís overall reading of options implied volatility collapsed on the merger news, falling 87.1% to 7.45% by 12:20 pm ET.

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