Today’s tickers: BJ, TRW, NSC & ODP
BJ – BJ’s Wholesale Club, Inc. – Shares of the warehouse club operator are currently up 10.75% to stand at $40.99 just before 11:30 am (ET), but earlier the price of the underlying stock surged 18.43% to reach an intraday- and new 52-week high of $43.83. BJ’s shares jumped after private equity firm, Green Equity Investors, purchased 5.1 million BJ shares – or 9.5% of the warehouse-club chain – and said the shares are undervalued. Green Equity also revealed plans to discuss taking BJ’s private with the warehouse club’s executives. Options investors scrambled to place bullish trades on the stock, with some traders opting to sell short roughly 1,200 puts at the July $40 strike to pocket an average premium of $0.46 per contract. Put sellers keep the full premium received on the transaction as long as BJ’s share price exceeds $40.00 through expiration day. Investors short the puts are ready and willing to have shares of the underlying stock put to them at an effective price of $39.54 in the event the puts land in-the-money at expiration. Bulls hoping to see BJ’s shares continue higher scooped up approximately 585 calls at the July $45 strike for an average premium of $0.45 apiece. Call buyers stand ready to accrue profits if shares jump 3.7% over today’s highest recorded price of $43.83 to surpass the average breakeven point on the calls at $45.45 by July expiration day. BJ’s overall reading of options implied volatility exploded today, rising 28.4% to 38.08% as of 11:40 am (ET).
TRW – TRW Automotive Holdings Corp. – The purchase of a plain-vanilla debit put spread on the diversified supplier of automotive systems, modules and components to global automotive equipment manufacturers indicates one options strategist is bracing for shares of the underlying stock to decline ahead of August expiration. TRW’s shares are currently down more than 4.3% to stand at $26.38 as of 11:07 am (ET). The bearish investor picked up 5,000 puts at the August $25 strike for a premium of $1.65 apiece, and sold the same number of puts at the lower August $20 strike for a premium of $0.40 each. Net premium paid to establish the spread amounts to $1.25 per contract. Thus, the trader responsible for the transaction is prepared to profit should TRW’s shares fall another 9.97% from the current price of $26.38 to breach the effective breakeven point to the downside at $23.75 by August expiration. The investor walks away with maximum potential profits of $3.75 per contract if the price of the underlying stock plummets 24.2% to trade below $20.00 by expiration day in August. The sharp increase in demand for put options on the stock lifted TRW’s overall reading of options implied volatility 8.1% to 69.26% as of 11:12 am (ET).
NSC – Norfolk Southern Corp. – Bullish investors piled into call options on the provider of rail transportation services in the first half of the trading session despite the 1.60% decline in the price of the underlying shares to $52.20. Options traders enacting near-term optimistic stances on the stock perhaps took action today after Norfolk Southern Corp. was rated new ‘outperform’ with a 12-month target share price of $75.00 at Macquarie Research on Wednesday. Bulls purchased approximately 4,700 calls at the July $55 strike for an average premium of $1.14 per contract. Call buyers are poised to profit should Norfolk’s shares reverse course and rally 7.5% over the current price of $52.20 to surpass the average breakeven point to the upside at $56.14 ahead of July 16 expiration. Other options strategists wary of continued erosion in the price of the underlying shares scooped up 1,100 bearish puts at the July $50 strike for an average premium of $0.80 each. Investors long the puts make money if Norfolk’s shares tumble 5.75% lower to breach the effective breakeven price of $49.20 by July expiration. We note Norfolk’s shares have not traded below $49.20 since February 17, 2010. Options implied volatility on the stock jumped 10.6% to 44.64% by 11:25 am (ET).
ODP – Office Depot, Inc. – Investors expecting Office Depot’s share price to head higher purchased in- and out-of-the-money call options on the retailer of office supplies during morning trading even though the price of the underlying stock declined as much as 2.5% to touch an intraday low of $3.94 before 11:00 am (ET) today. Plain-vanilla call buyers should pat themselves on the back because ODP’s shares have since reversed course to rally more than 4.95% in the past hour to trade at $4.24 as of 11:50 am (ET). Bullish traders scooped up more than 1,300 in-the-money calls at the August $4.0 strike for an average premium of $0.50 per contract. Investors long the calls make money if Office Depot’s shares rally above the average breakeven price of $4.50 by August expiration. Longer-term optimistic individuals purchased at least 2,500 calls at the higher January 2011 $5.0 strike for a premium of $0.50 a-pop. Traders are prepared to accrue profits if the retailer’s shares surge 29.7% over the current price of $4.24 to trade above the average breakeven price of $5.50 by expiration day in January 2011.
