IB Options Brief: Pandora Media, Inc. (P) & American International Group, Inc. (AIG)

Options Unusual Activity

IB Options Brief: Pandora Media, Inc. (P) & American International Group, Inc. (AIG)

Posted March 5th, 2012 by Caitlin Duffy in Unusual Activity

Pandora Call Options In Play Ahead Of Earnings

P ñ Pandora Media, Inc.
Shares in the provider of Internet music services are up 6.5% at $14.80 this afternoon on the heels of an upgrade to ëbuyí from ëholdí at Stifel Nicolaus and leading up to Pandoraís fourth-quarter earnings release ahead of the opening bell on Tuesday morning. Options on Pandora Media, Inc. are more active than usual today as investors take positions prior to the fourth-quarter performance report. Call options are far more popular than puts, with more than nine calls changing hands on Pandora for each single put in play.

Volume is heaviest at the Mar. $16 strike, where more than 7,000 calls traded against open interest of just 917 contracts. Trading in the $16 calls is mixed, but it looks like slightly more of the contracts were purchased for an average premium of $0.44 each. Call buyers may profit at expiration in the event that Pandoraís shares surge 11.1% to surpass the average breakeven price of $16.44. Bullish positioning was also seen in the Mar. $17 strike calls as traders paid an average premium of $0.17 for around 400 of the contracts. Overall options volume on Pandora is fast approaching 20,000 contracts on the day just before 1:20 p.m. in New York trade.

AIG ñ American International Group, Inc.
The insurance giantís shares are off their highest levels of the session, but remain positive, up 2.2% at $30.46 as of 11:45 a.m. in New York. Shares rallied as much as 5.0% to $31.30 this morning on news AIG is selling $6 billion in shares of AIA Group Ltd. to institutional investors. The bullish move in the price of the underlying shares is a boon for traders observed snapping up weekly call options at the tail-end of the last week.

For example, the 1,923 open call positions at the Mar. í09 $29 strike were mostly initiated by buyers paying, on average, $0.72 per contract this past Thursday and Friday. One transaction, the purchase of 440 of the $29 strike calls on Friday morning for a premium of $0.48 apiece, has one trader sitting on a pile of cash. If the strategist chose to take profits on the position right now, he or she would find they could more than triple their money given the current listed bid price of $1.53.

Traders positioning for shares in AIG to continue to climb this week snapped up out-of-the-money calls, with some investors purchasing around 710 contracts up at the Mar. í09 $32 strike for an average premium of $0.25 each. Options traders on the whole are favoring calls on AIG over puts, trading more than 3.6 calls on the stock for each single put in play as of midday.