IB Options Brief: United Continental Holdings, Inc. (UAL) & HSBC Holdings, PLC (HBC)
Options strategist positions for a United Continental rally
UAL ñ United Continental Holdings, Inc.
A three-legged options combination play on United Continental suggests one strategist expects the price of the underlying to rebound by June expiration. Shares in UAL are down 2.25% at $20.75 as of 12:05pm in New York trade.
The contrarian player is positioning for the medium-term rally by lowering the cost of buying a debit call spread with the sale of out-of-the-money put options. The trader sold 10,000 puts at the June $19 strike, to buy the 10,000-lot June $22/$26 call spread, for which he received a net credit of $0.10 per contract.
The investor at least keeps the net credit as long as shares in UAL exceed $19.00 through expiration day. Additional profits are available to the bullish trader in the event that United Continentalís shares reverse course to rally 6.0% over the current price of $20.75 to trade above $22.00 in the next couple of months to expiration. Including the net credit, the investor may pocket maximum potential profits of $4.10 per contract on the transaction if the price of the underlying stock jumps 25.3% to exceed $26.00 at expiration in June.
HBC ñ HSBC Holdings PLC
It looks like one options investor raised bullish expectations on Europeís biggest bank this morning with shares in HSBC Holdings currently trading 1.0% higher on the session at $54.44 as of 11:25am. The financial services providerís shares were higher in European trading as well on sentiment that upcoming results from a government-sponsored Independent Commission on Banking will be less thorny than some investors initially anticipated.
The trader responsible for the majority of options volume generated on HBC thus far today appears to be rolling a previously established bullish stance up to the next available strike price in the May contract. It looks like the bullish player originally purchased some 5,000 calls at the May $52.5 strike for an average premium of $1.16 each back on March 31, when shares in HBC were trading around $51.77. The subsequent run up in the price of the underlying lifted premium on the now in-the-money call options, allowing the trader to sell all 5,000 lots this morning at a premium of $2.67 apiece.
Net profits on the sale amount to $1.51 per contract, not bad for a one-week return. Next, the options player extended bullish sentiment on the banking services provider, buying 5,000 fresh calls at the May $55 strike for a premium of $1.24 each, on previously existing open interest of just 840 contracts. The trader profits on the new bullish stance if shares in HSBC Holdings rally another 3.3% over the current price of $54.44 to surpass the effective breakeven point to the upside at $56.24 by May expiration.
A three-legged options combination play on United Continental suggests one strategist expects the price of the underlying to rebound by June expiration. Shares in UAL are down 2.25% at $20.75 as of 12:05pm in New York trade.
The contrarian player is positioning for the medium-term rally by lowering the cost of buying a debit call spread with the sale of out-of-the-money put options. The trader sold 10,000 puts at the June $19 strike, to buy the 10,000-lot June $22/$26 call spread, for which he received a net credit of $0.10 per contract.
The investor at least keeps the net credit as long as shares in UAL exceed $19.00 through expiration day. Additional profits are available to the bullish trader in the event that United Continentalís shares reverse course to rally 6.0% over the current price of $20.75 to trade above $22.00 in the next couple of months to expiration. Including the net credit, the investor may pocket maximum potential profits of $4.10 per contract on the transaction if the price of the underlying stock jumps 25.3% to exceed $26.00 at expiration in June.
HBC ñ HSBC Holdings PLC
It looks like one options investor raised bullish expectations on Europeís biggest bank this morning with shares in HSBC Holdings currently trading 1.0% higher on the session at $54.44 as of 11:25am. The financial services providerís shares were higher in European trading as well on sentiment that upcoming results from a government-sponsored Independent Commission on Banking will be less thorny than some investors initially anticipated.
The trader responsible for the majority of options volume generated on HBC thus far today appears to be rolling a previously established bullish stance up to the next available strike price in the May contract. It looks like the bullish player originally purchased some 5,000 calls at the May $52.5 strike for an average premium of $1.16 each back on March 31, when shares in HBC were trading around $51.77. The subsequent run up in the price of the underlying lifted premium on the now in-the-money call options, allowing the trader to sell all 5,000 lots this morning at a premium of $2.67 apiece.
Net profits on the sale amount to $1.51 per contract, not bad for a one-week return. Next, the options player extended bullish sentiment on the banking services provider, buying 5,000 fresh calls at the May $55 strike for a premium of $1.24 each, on previously existing open interest of just 840 contracts. The trader profits on the new bullish stance if shares in HSBC Holdings rally another 3.3% over the current price of $54.44 to surpass the effective breakeven point to the upside at $56.24 by May expiration.
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Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
About Andrew Wilkinson
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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