Wednesday Options Brief: COP, HD & HCA

Includes: COP, HCA, HD
by: Interactive Brokers

COP - ConocoPhillips Company - Options on ConocoPhillips are among the most active by volume on Wednesday, with shares in the name down 0.90% on the session to stand at $61.12 as of 12:05 p.m. ET, just hours ahead of the global energy company's fourth-quarter earnings report after the closing bell. The largest transaction in COP options this morning was the purchase of an Aug. $47.5/$57.5 put spread, established at a net premium outlay of $1.80 per contract. Time and sales data shows blocks of 48,700 puts trading as part of a spread today, with overall volume at each strike topping 50,000 contracts. The bearish position makes money, or provides downside protection, if shares in COP drop 9.0% from the current price of $61.12 to trade below the effective breakeven point at $55.70. Maximum potential profits of $8.20 per contract are available on the spread should ConocoPhillips' shares slump 22% to settle at a new 52-week low of $47.50 at August expiration. Shares in COP last traded below $47.50 back in February 2010.

HD - Home Depot, Inc. - Bullish options activity on the home improvement retailer this morning looks for shares in Home Depot to improve during the next couple of months. The stock today trades up 0.10% to stand at $67.27 as of 10:45 a.m. ET, after the shares earlier this week rallied to a new 52-week high of $68.15. The heaviest trading traffic in HD options is at the Mar. $65 strike, where upwards of 3,300 in-the-money calls changed hands versus open interest of 1,104 contracts. It looks like most of the call options were purchased by one trader for an average premium of $3.05 apiece during the first 10 minutes of the trading day. The strategist may profit at expiration in March should shares in Home Depot rally X% over the current price of $67.27 to top the average breakeven point at $68.05. The company is scheduled to report fourth-quarter earnings ahead of the opening bell on February 26th.

HCA - HCA Holdings, Inc. - Shares in the owner and operator of hospitals and surgery centers are up better than 2.5% this morning to stand at $37.61 as of 11:05 a.m. ET, but options activity on HCA Holdings today suggests one trader is positioning for the price of the underlying to reverse course in the near term. The largest transaction in HCA options this morning was the purchase of 2,500-lot Feb. $34/$36 bear put spread for a net premium of $0.675 per contract. The position makes money if shares in HCA decline 6.0% from the current price of $37.61 to trade below the breakeven point on the downside at $35.325. Maximum potential profits are available on the spread should shares in HCA drop 9.6% during the next two weeks to trade below $34.00 by February expiration. Shares in HCA, up nearly 60% during the past six months, last traded below $34.00 on January 15th. HCA Holdings, Inc. reports fourth-quarter earnings ahead of the opening bell next Tuesday.

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