IB Options Brief: China Lodging Group, Ltd. (HTHT) & Delta Air Lines, Inc. (DAL)
HTHT ñ China Lodging Group, Ltd.
The economy hotel chain operator based in Shanghai enticed one bullish options player to sell a sizable chunk of put options in the March 2011 contract today. Shares in China Lodging Group are up more than 2.15% this afternoon to arrive at $20.13 as of 12:30pm.
It looks like the trader sold 3,856 puts at the March 2011 $17.5 strike to pocket an average premium of $1.075 per contract. The investor keeps the full amount of premium received on the transaction as long as China Lodging Groupís shares trade above $17.50 through expiration day in March.
HTHTís shares have traded at or above $17.50 since August 12, 2010. The more than 3,920 option contracts that have changed hands on the stock thus far today exceed the 2,966 contracts of overall previously existing open interest on China Lodging. Options implied volatility on the stock is lower by 4.9% to stand at 53.95% in early afternoon trade.
DAL ñ Delta Air Lines, Inc.
Shares in Delta Air Lines are down 2.9% this morning to stand at $12.69, but it looks like one long-term bullish player is taking advantage of the pullback in the price of the underlying stock by picking up a debit call spread in the June 2011 contract. It appears that a like-minded optimist purchased the same call spread on Delta Air Lines during trading on Tuesday.
Deltaís shares slipped after the second-largest carrier cut the upper end of its operating margin projection for the current quarter to 6% from 7%, and said capacity in 2011 will likely rise no more than 3% as the firm focuses on paying down debt.
The call-spreader is positioning for shares of the Atlanta-based company to rally sharply by the middle of next year. The trader picked up roughly 3,000 calls at the June 2011 $15 strike for an average premium of $0.91 each, and sold about the same number of calls at the higher June 2011 $20 strike at an average premium of $0.16 a-pop.
Net premium paid to initiate the spread amounts to $0.75 per contract. Thus, the investor is poised to profit should shares in Delta Air Lines jump 24.1% over the current price of $12.69 to surpass the average breakeven point at $15.75 by expiration day in June. Maximum potential profits of $4.25 per contract are available to the trader if Deltaís shares surge 57.6% to $20.00 before the options expire next year.
Meanwhile, near-term call activity appears to be the work of traders throwing in the towel on the U.S. carrier ahead of expiration on Friday. Approximately 2,350 calls were sold at the December $13 strike for an average premium of $0.15 each.
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