Wednesday Options Brief: RATE, AZN & PRLB

Includes: AZN, PRLB, RATE
by: Interactive Brokers

RATE - Bankrate, Inc. - Shares in the operator of Internet-based consumer banking and personal finance companies are down sharply this morning after the company reported lower-than-expected fourth-quarter earnings on Tuesday. The stock dropped more than 19% at the start of the session to touch a new 52-week low of $10.00. Options traders bracing for shares in the name to decline in the near term established bearish positions in Bankrate options during Tuesday's trading session. The post-earnings report nosedive in RATE shares today has resulted in substantial overnight paper profits on some of these positions. It looks like traders who snapped up 190 puts at the Feb. $12.5 strike for an average premium of $0.53 apiece yesterday, now find their contracts changing hands at $2.45, or 4.6 times as much, as of 11:20 a.m. ET on Wednesday. Similarly, around 100 of the Mar. $12.5 strike put options purchased for an average premium of $0.90 each on Tuesday, are today trading at $2.20 per contract. Overall options volume of 685 contracts in play on RATE this morning is up sharply versus the stocks average daily volume of around 80 contracts. Puts are more active than calls, with the put/call ratio hovering at 5.0 just after 11:30 a.m. ET.

AZN - AstraZeneca PLC - Upside calls on biopharmaceutical company, AstraZeneca, are active this morning with shares in the name up 0.70% on the day at $45.84, helped higher by positive comments from an analyst at UBS. The single-largest print in AZN options appears to be a large bullish bet that pays off if shares in AstraZeneca rally sharply during the next five months. It looks like one strategist purchased a block of 9,000 calls at the July $50 strike for a premium of $0.65 apiece during the first 30 minutes of the trading session. The position makes money if shares in the drug maker jump 10% over the current price of $45.84 to exceed the effective breakeven point at $50.65 by July expiration. Shares in AZN last traded above $50.65 back in July 2011.

PRLB - Proto Labs, Inc. - Shares in Proto Labs are soaring today, rallying as much as 25% to an all-time high of $52.50 in the first half of the session, after the company posted better-than-expected fourth-quarter earnings ahead of the opening bell. Upside call buying in March expiry options suggests some traders are positioning for PRLB shares to extend gains in the near term. The Mar. $55 strike calls are seeing the most volume today, with 1,300 lots changing hands versus open interest of 291 contracts. Time and sales data indicates most of the calls were purchased in the early going for an average premium of $1.24 each. Traders long the $55 strike call options may profit at expiration next month should PRLB shares increase another 7.0% over today's high of $52.50 to top the average breakeven point at $56.24. Meanwhile, bullish positions established ahead of Proto Labs' earnings report have resulted in hefty overnight paper profits for some strategists. The Feb. $45 strike calls were active yesterday after some 110 contracts were purchased for an average premium of $1.05 apiece. These deep in-the-money calls are today changing hands at $6.90 per contract as of midday in New York.