Wednesday Options Brief: GM, FRAN & FDO

Includes: FDO, FRAN, GM
by: Interactive Brokers

GM - General Motors Co. - Trading traffic in weekly options on General Motors today indicates some traders are positioning for shares in the automaker to rise to the highest level since Valentine's Day during the next couple of trading sessions. Shares in GM are near their highs of the day, up 2.0% at $28.67 as of 11:40 a.m. in New York. The most actively traded weekly contracts as measured by volume on Wednesday morning are the Mar. 22 '13 $29 strike call options, with upwards of 4,500 contracts in play versus zero open positions. It looks like most of the calls were purchased at a premium of $0.05 apiece. Call buyers stand ready to profit at expiration later this week should shares in GM rally another 1.3% to settle above the average breakeven point at $29.05. Traders long the calls at $0.05 per contract have seen the value of the contracts double this morning, with the options currently changing hands at $0.11 each as of 11:45 a.m. ET. Bullish bets are also on the rise at the April $29 strike, with around 900 calls purchased for an average premium of $0.49 per contract. Shares in General Motors are down roughly 2.5% since the start of 2013.

FRAN - Francesca's Holdings Corp. - Shares in Francesca's jumped 10.5% to $29.80 on Wednesday morning after the retailer of women's apparel and accessories reported better-than-expected fourth-quarter earnings after the close on Tuesday. The sharp move in the price of the underlying shares sparked heavy options activity on the stock today, with volume topping 4,500 lots by midday on the East Coast versus average daily volume of around 1,600 contracts. Most of the activity is in April and May expiry put options, with some traders positioning for shares in Francesca's to potentially pullback in the near term. The April $25 strike put options traded 1,300 times on Wednesday morning, and appear to have been mostly purchased at an average premium of $0.45 each. Similarly, the May $25 strike puts are changing hands on FRAN, with roughly 1,200 lots in play against 14 open contracts. The bulk of the $25 strike put options were purchased earlier in the session at an average premium of $1.00 apiece. Buyers of the May expiry $25 strike put options stand ready to profit at expiration should Francesca's shares drop more than 15% from the current price of $28.50, to breach the average breakeven point on the downside at $24.00. Shares in the specialty retailer last traded below $24.00 at the end of December.

FDO - Family Dollar Stores, Inc. - Upside call options changing hands on Family Dollar Stores in the early going on Wednesday morning look for shares in the name to rally to the highest level since the start of 2013. Shares in Family Dollar are rallying today, trading up 3.2% on the session at $60.02 as of 11:05 a.m. ET. Bullish positions are building in the front month calls, with around 780 lots in play at the April $62.5 striking price versus open interest of 394 contracts. Traders appear to have purchased most of the $62.5 strike calls for an average premium of $0.87 apiece, and may profit at expiration next month should shares in Family Dollar rally another 5.5% to surpass the average breakeven price of $63.37. The discount store chain is scheduled to report second-quarter earnings on April 10th.