USB – U.S. Bancorp – Shares in the financial services provider yesterday rallied to the highest level since September of 2008, moving sharply higher during the final two hours of the session on Wednesday following the Fed’s announcement that it will reduce its asset purchases by $10 billion starting in January. The stock is off 0.50% on Thursday to stand at $39.92 just before 11:30 a.m. in New York trading.
Trading in the regular Jan ’14 $39 strike puts on USB near the start of the session suggests at least one options player is bracing for the price of the underlying to potentially edge lower during the next four weeks to expiration. It looks like one strategist purchased 5,000 of the Jan ’14 $39 puts for a premium of $0.41 per contract. The trade may represent downside protection to hedge a long position in the underlying shares or an outright bearish play that may be profitable in the event that shares in U.S. Bancorp pullback in the near term. The puts make money at expiration next month if shares in USB decline 3.3% from the current price of $39.92 to breach the effective breakeven point on the downside at $38.59. The 17 Jan ’14 expiry puts expire the week prior to the company’s fourth-quarter earnings release scheduled for January 22nd ahead of the opening bell.
KBH – KB Home – Shares in KB Home are moving lower on Thursday after the company reported fourth-quarter earnings and revenue that missed the average of analyst estimates prior to the opening bell this morning. The stock is down 3.5% on the day at $16.94 as of 11:10 a.m. EST.
December expiry put options changing hands on the homebuilder during the first 10 minutes of the session look for shares to continue to slide lower ahead of the weekend. The Dec $17 strike puts traded around 3,500 times in the early going, exceeding open interest of 2,875 contracts. Most of the $17 puts appear to have been purchased at a premium of $0.18 each, and may be profitable at expiration this week in the event that KB Home shares settle below the breakeven price of $16.82. Shares in KBH are still positive for the year, up roughly 5.0% since January 2nd, but have dropped more than 30% since reaching a 52-week high of $25.14 in May.
DWA – Dreamworks Animation SKG, Inc. – Fresh interest in upside call options on the creator of animated feature films suggests some traders are positioning for the price of Dreamworks shares to continue to march higher during the next six months. The stock is up roughly 2.2% on the day at $34.75 as of 11:00 a.m. EST.
Shares in Dreamworks rallied more than 40% during the second half of 2013, and trading in the Jun ‘14 $38 strike calls on the stock today looks for shares to extend gains during the first half of 2014. Upwards of 3,000 of the Jun ’14 $38 calls have changed hands so far today against open interest of 109 contracts, and it looks like most of the volume was purchased at an average premium of $2.33 each. Call buyers stand ready to profit at June expiration should shares in DWA rally 16% over the current price of $34.64 to exceed the average breakeven point at $40.33. The stock at its current level is poised to end 2013 up nearly 110% for the year.
