Monday Options Brief: CXW, HUM & RRGB

 |  Includes: CXW, HUM, RRGB
by: Interactive Brokers

CXW - Corrections Corporation of America - Put options in play on prison operator, Corrections Corporation of America, this morning indicates one or more traders may be bracing for shares in the name to pullback sharply in the near term. The largest U.S. owner and operator of privatized correctional and detention facilities likely reports fourth-quarter earnings next week. The stock today trades 1.0% lower to stand at $37.75 as of midday in New York, on a down day for U.S. stocks. The Mar. $34 strike puts are the most active options changing hands on CXW today, with 5,000 puts trading against open interest of 390 contracts. It looks like most of the $34 puts were purchased in the early going for an average premium of $0.48 apiece. Put buyers stand ready to profit at March expiration should shares in Corrections Corp. of America decline 11% from the current price of $37.75 to breach the average breakeven point on the downside at $33.54. Shares in CXW, up 60% since this time last year, last traded below $33.54 at the end of November.

HUM - Humana - Shares in the Louisville, Kentucky-based health care company are up better than 4.7% at $78.90 this afternoon after the company posted better-than-expected fourth-quarter earnings ahead of the opening bell. Options traders positioning for shares in Humana to extend gains during the next six months snapped up August expiry calls on the stock. The August $82.5 strike calls changed hands upwards of 790 times during the first half of the session, with the bulk of the contracts purchased for an average premium of $3.40 each. Bulls long the $82.5 strike calls stand ready to profit at expiration should HUM's shares rally another 9% to exceed the average breakeven price of $85.90. Meanwhile, traders positioning for Humana's shares to potentially hit a fresh 52-week high by expiration in six months picked up roughly 360 calls at the Aug. $95 strike for an average premium of $0.75 apiece. Traders long the $95 strike call options make money if shares in the health care company jump 21.5% to top $95.75 by August expiration.

RRGB - Red Robin Gourmet Burgers, Inc. - The operator of casual dining restaurant chain, Red Robin, popped up on our 'hot by options volume' market scanner this morning due to heavier than usual trading traffic in bearish puts. Shares in Red Robin Gourmet Burgers are down 2.3% on the session to stand at $36.34 as of 12:10 p.m. ET. The company is set to report fourth-quarter earnings next week, and it looks like some traders are bracing for the price of the underlying to potentially take a hit. The Mar. $30 strike puts are seeing the most volume, with 900 lots in play versus open interest of 331 contracts. Time and sales data on the $30 puts indicates most of the volume was purchased for an average premium of $0.30 each. Put buyers may profit in the event that Red Robin's shares drop nearly 20% to trade below $29.70 by expiration next month. The restaurant operator's shares are up more than 30% since the end of October 2012.