Options commentary will resume on July 24, 2013.
Today’s tickers: LO, AXP & VRSN
LO – Lorillard Inc. – Put options on the third-largest U.S. cigarette maker are changing hands today ahead of the company’s second-quarter earnings report on Thursday prior to the opening bell. Shares in the Lorillard are down more than 1.0% at $46.00 as of 1:05 p.m. in New York. The most actively traded options as measured by volume on LO as of the time of this writing are the August and September expiry puts. Front month options volume is concentrated in the Aug $42.5 strike puts, with around 4,700 lots traded versus open interest of 2,613 contracts. Time and sales data suggests most of the $42.5 strike puts were purchased for an average premium of $0.58 apiece during the first hour of the session. The Sep $40 strike puts are also in play, with nearly 7,000 contracts traded so far today. Much of the volume appears to have been purchased at a premium of $0.67 each. Overall options volume on the stock is hovering just below 12,500 contracts as of 1:15 p.m. ET, or roughly 160% of the stock’s average daily volume of around 7,750 contracts.
AXP – American Express Co. – Shares in American Express are in recovery mode today, up 1.4% at $75.11 in early afternoon trading after last week dipping more than 5.0%. Options activity on American Express this morning, however, indicates one or more traders are positioning for the price of the underlying to decline in the near term. Far out of the money weekly puts on the stock attracted substantial fresh interest in the early going this morning, with roughly 3,800 of the Jul 26 ’13 $70 strike puts exchanged against open interest of 285 contracts. It looks like one trader purchased most of the volume for a premium of $0.05 each. The $70 puts make money at expiration should shares in AXP plunge 7.0% from the current price of $75.11 to breach the effective breakeven price of $69.95, the lowest level for the stock since mid-May. The Aug $70 puts are also changing hands today, with around 1,000 of those contracts traded this morning.
VRSN – VeriSign, Inc. – Options on Internet infrastructure services provider, VeriSign, Inc., are active today ahead of the company’s second-quarter earnings report on Thursday. Shares in the name are down 0.50% on the session at $45.52 as of 12:10 p.m. ET. Front month calls are the most traded options on VRSN as of midday in New York, with roughly 5,100 Aug $46 strike calls in play versus open interest of 180 contracts. It looks like most of the $46 call options may have been sold for a premium of $1.15 apiece. Maximum gains of $1.15 per contract are available on the trade as long as shares in VeriSign settle below $46.00 at expiration next month. The calls may have been sold outright or written against a long stock position. If sold outright, the trade starts losing money in the event that VRSN shares rally 3.6% over the current price of $45.52 to exceed the upper breakeven price of $47.15.
Caitlin Duffy
Equity Options Analyst
