Wednesday Options Brief: GRMN, CELG & GSK

Includes: CELG, GRMN, GSK
by: Interactive Brokers

GRMN - Garmin, Ltd. - Bearish options were changing hands on Garmin this morning after the provider of navigation devices and GPS technology reported lower-than-expected fourth-quarter earnings and provided full year 2013 guidance below the consensus estimate. Shares in Garmin fell more than 11% at the start of the session to a new 52-week low of $34.65. Put buying on the stock ahead of Garmin's fourth-quarter report this morning generated substantial overnight profits for one or more traders today. Open interest in the Mar. $38 strike puts increased 650 contracts following Tuesday's trading session, and a look back at time and sales data for the $38 puts indicates most of the contracts were purchased for an average premium of $1.46 each. The sharp post-earning pullback in the price of the underlying now finds the Mar. $38 strike puts changing hands at $3.65 each, or more than twice the amount traders paid for the contracts on Tuesday. Meanwhile, options traders initiating bearish positions on Garmin today looked to the Mar. $34 strike, exchanging more than 1,400 puts versus open interest of 672 contracts. It looks like most of the $34 puts were purchased for an average premium of $0.64 apiece. Put buyers may profit at expiration next month should Garmin's shares slip another 4% to trade below the average breakeven price of $33.36, the lowest level for GRMN shares since October 2011.

CELG - Celgene Corp. - Shares in the maker of cancer drugs are up sharply on Wednesday after the company announced it will buy back $600 million in stock from an unnamed investment bank during the next three months. In June, the biotechnology company approved a $2.5 billion stock buyback program. CELG shares are up better than 2.5% on the day to stand at $103.04 as of 11:35 a.m. ET, after earlier rallying to a record-high of $103.69. Upside call buying on the stock today suggests some options traders are looking for shares in Celgene to extend gains during the next few weeks. The Mar. $110 strike calls are seeing the most volume thus far in the session, with roughly 2,600 contracts in play versus open interest of 1,863 lots. Time and sales data indicates most of the calls changing hands in the early going were purchased for an average premium of $0.72 apiece. Traders long the $110 strike calls stand ready to profit at expiration next month should Celgene's shares surge 6.8% over today's high of $103.69 to top the average breakeven point at $110.72.

GSK - GlaxoSmithKline PLC - Pharmaceuticals company, GlaxoSmithKline, popped up on our market scanners this morning following a burst of upside call buying in the April expiry call options contracts. Trading traffic in out-of-the-money calls on GSK today suggests some traders are positioning for shares in the name to potentially rally to their highest level in nearly six months by April expiration. Shares in the drug maker are currently up 0.50% on the day to stand at $45.50 as of 12:15 p.m. ET. The most actively traded options on GSK are the April $47 strike calls, with upwards of 3,100 lots in play against open interest of 200 contracts. It looks like most of calls were purchased for an average premium of $0.43 apiece during the first 10 minutes of the opening bell this morning. Call buyers stand ready to profit in the event that GSK shares rally 4.2% over the current price of $45.50 to exceed the average breakeven point at $47.43 by April expiration.