Thursday Options Brief: GPS, USB, & PBR

Includes: GPS, PBR, USB
by: Interactive Brokers

GPS - Gap, Inc. - Shares in apparel retailer, Gap, Inc., were halted on Thursday morning after details regarding the company's February same-store sales were mistakenly made available in a transcript posted on Seeking Alpha. The report was scheduled for release after the closing bell today. The stock traded up 4.2% to $35.90 before being halted with news pending. Prior to the halt, options traders snapped up weekly calls on GPS. The Mar. 08 '13 $35 strike contracts saw the most volume, with upwards of 5,300 calls changing hands against open interest of just 348 lots. It looks like most of the calls were purchased around 10:05 a.m. ET this morning at an average premium of $0.25 apiece. Shares are once again trading, up 3.5% at $35.67 as of the time of this writing, and intraday gains on the back of Gap's February comps data now finds the $35 strike calls changing hands at $0.86 apiece at 11:30 a.m. ET. Traders long the call options ahead of the trading halt have seen the value of those contracts more than triple this morning.

USB - U.S. Bancorp - Heavy trading traffic in U.S. Bancorp call options on Thursday morning may be the work of one or more strategists initiating bullish bets on the stock ahead of the release of the Federal Reserve's stress test results after the close this afternoon. Shares in USB are up 0.75% on the day at $34.00 as of 11:45 a.m. ET in New York. The Mar. $35 strike calls traded upwards of 13,000 times against open interest of 8,022 contracts in the early going this morning, with much of the volume changing hands at a premium of $0.05 each. Traders buying the call options stand ready to profit at expiration next week should shares in U.S. Bancorp rally another 3.0% to top the average breakeven price of $35.05. USB was rated new 'Buy' with a 12-month target price of $42.00 at Rafferty Capital Markets on Tuesday.

PBR - Petroleo Brasileiro S.A. - Shares in state-owned Brazilian energy company, Petrobras, are rallying for a third consecutive session on an upgrade to 'Outperform' from 'Neutral' with a target price of $25.00 at Credit Suisse. The stock increased sharply yesterday after Petrobras unexpectedly increased diesel prices by 5%. PBR shares jumped 6% on Thursday morning to touch an intraday high of $17.75, having rallied more than 20% since the start of this week. The stock trades at the highest level since February 5th today, but is still down nearly 40% since this time last year. Traders positioning for shares to move higher into the weekend picked up weekly calls on Petrobras, exchanging upwards of 2,000 contracts at the Mar. 08 '13 $17 strike versus open interest of 929 lots. Early movers paid an average premium of $0.41 apiece for the calls and stand ready to profit at expiration should PBR shares settle above the average breakeven price of $17.41. The Mar. 08 '13 $17.5 strike call options are also active this morning, with around 600 contracts purchased in the early going at an average premium of $0.12 each. Meanwhile, traders who purchased upside calls on PBR earlier in the week are sitting pretty today as the price of the underlying continues to march higher. Yesterday, bulls snapped up 1,000 calls at the Mar. 08 '13 $16 strike for an average premium of $0.29 each, roughly 500 calls at the $16.5 strike for a premium of $0.15 per contract, and around 900 of the $17 strike calls at a premium of $0.08 apiece. Overnight paper profits on these positions are sizable, with these calls now changing hands at $1.33, $0.85 and $0.41 each, respectively, as of 11:05 a.m. in New York.