IB Options Brief: Green Mountain Coffee Roasters, Inc. (GMCR) & BP PLC (BP)
Green Mountain Jitters Continue To Drive Heavy Trading In Options-Land
GMCR ñ Green Mountain Coffee Roasters, Inc.
Shares in Green Mountain Coffee Roasters turned positive earlier in the session, but are now continuing to unravel on the heels of a roughly 25.0% decline in price since hedge fund manager David Einhorn of Greenlight Capital presented analysis of the coffee company at an investor conference on Monday. Over the past month, the stock has fallen as much as 45.0% to touch todayís intraday low of $63.26 since reaching the September 20, 52-week high of $115.98. Frenzied trading in GMCR options continues today, following similarly active sessions earlier in the week. Investors are exchanging calls and puts in relatively equal numbers, with puts outpacing calls slightly in early-afternoon trade.
The front month garnered the most attention from options players placing short-term bets on the stock ahead of expiration at the end of the week. Investors hoping the stock has reached a bottom appear to have purchased in- and out-of-the-money calls, and sold puts. Meanwhile, concerned parties wary the stock could extend losses snapped up puts. The bears bought around 1,100 puts at the Oct. $55 strike for an average premium of $1.09 each. These deep out-of-the-money put options may expire worthless at expiration if shares in GMCR fail to drop sharply by the end of the trading week. But, the puts could provide quick profits for some traders if premium on the contracts rises with either volatility or further declines in the price of the underlying. The most active put on Green Mountain is the Oct. $65 strike, where nearly 6,000 puts changed hands against open interest of 1,539 positions. Trading patterns in the puts reveal mixed opinion.
Investors itching for a quick rebound in GMCR purchased October contract calls. More than 7,000 calls have traded at each of the Oct. $70 and $75 strikes. While both buyers and sellers drove volume in the contracts, there does appear to be somewhat of a bullish bias thus far today. Traders long the calls may profit at expiration should the week wrap up with shares in Green Mountain back on track. Overall volume in GMCR options is just under 100,000 contracts as of 2:10 pm on the East Coast.
BP ñ BP PLC
Big prints in call options on European oil behemoths, BP and Total, shed some light on one strategistís view of which companyís shares may bloom come spring 2012. Earlier in the session, Total SA, Europeís third-largest oil company, popped up on our ëhot by options volumeí market scanner after a block of 8,500 calls changed hands at the May 2012 $55 strike against open interest of 385 contracts. The call options were sold outright for an average premium of $3.06 each.
The transaction in Total calls today is relatively large next to overall open interest on the stock of 136,679 contracts. Totalís open interest pales in comparison to BPís, which is greater than 1.29 million contracts. Roughly 30 minutes before the call activity in Total appeared on our scanners, it looks like the same investor purchased 8,500 call options on BP at the April $44 strike for a premium of $2.45 apiece.
The so-called dispersion trade seems to reveal a strategy that benefits the investor most if Totalís shares flounder and BPís shares spike by the assigned May and April expiration dates, respectively. Looking at these positions one at a time, the trader may walk away with the full $3.06 premium on the sale of Total calls as long as the price of the underlying fails to rally above $55.00 by May expiration. Meanwhile, the long stance in April $44 strike calls on BP may be a profitable one should the stock rally 14.0% over the current share price of $40.73 to surpass the breakeven point at $46.45 by expiration day in April. Totalís shares are currently up 1.05% at $51.47 as of 2:00 pm in New York.
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