IB Options Brief: American International Group, Inc. (AIG) & Titanium Metals Corp. (TIE)
AIG ñ American International Group, Inc.
Shares in AIG have mostly traded within the range of $20.00 to $30.00 during the most recent six month period. Activity in long-dated call options on the insurer, however, suggests one strategist is positioning for the price of the underlying to break out strongly to the upside at some point during the next ten months. Shares in American International Group, Inc. are up 2.2% this morning at $29.70 after analysts at Deutsche Bank predicted the insurerís stock buyback program may be larger and more rapid than is implied by the current share price.
The largest single trade in AIG options this morning indicates one player expects the shares to trade at a substantial premium to the current price by January 2013 expiration. The trader appears to have purchased a block of 7,280 calls at the Jan. 2013 $45 strike for a premium of $0.35 apiece, though upwards of 9,800 call options have changed hands at that strike in the first half of the session. Profits are available to the call buyer at expiration as long as AIGís shares surge 53.0% in the next ten months to top the effective breakeven price of $45.35. Shares in AIG last traded above $45.35 in January 2011.
TIE ñ Titanium Metals Corp.
The titanium producer is in rally-mode today, with shares in the Dallas, Texas-based Company trading 0.90% higher on the day at $13.86 just after 11:45 a.m. in New York. Front-month call buying on Titanium Metals Corp. may mean some market participants anticipate the stock will extend gains in the near term. Options volume on TIE is concentrated in the April $14 strike call, where some 4,750 contracts changed hands against 1,525 open positions.
It looks like most of the dayís volume was generated by buyers paying an average premium of $0.40 per contract. Traders long the calls profit at expiration as long as shares in the metal producer rally another 4.0% to surpass the average breakeven price of $14.40.
Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained from theuse of this information. Past performance is not necessarily indicativeof future results.
This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this material arenot suitable for all investors. Any opinions expressed herein are givenin good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take into accountyour particular investment objectives, financial situations or needsand is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particular circumstancesand, as necessary, seek professional advice.
View Caitlin Duffy's post archive >