Tuesday Options Brief: HK, ZMH & RFMD

 |  Includes: HK, QRVO, ZBH
by: Interactive Brokers

HK - Halcon Resources Corp. - Shares in energy company, Halcon Resources, rallied more than 6.0% to an intraday high of $7.74 on Tuesday morning, sparking heavy trading traffic in upside call options on the stock. Bursts of heavy call buying on the stock earlier in the session suggests one or more options traders are positioning for shares in Halcon to increase sharply in the near and long term. Traders looking for shares in HK to potentially rally to the highest level since September of 2012 by May expiration snapped up around 2,300 calls at the May $8.0 strike for an average premium of $0.36 each. The company is scheduled to report first-quarter earnings during the first full week in May. Bulls looked to October expiry calls, as well. It looks like traders picked up around 700 calls at the Oct. $9.0 strike for an average premium of $0.65 each, and purchased 1,100 call options at the Oct. $10 strike at an average premium of $0.47 apiece. Buyers of the October expiry $10 strike calls may profit at expiration in the event that Halcon's shares surge 35% to top the average breakeven price $10.47. The most heavily traded contracts on HK on Tuesday morning were the Jan. 2015 $12 strike calls, which traded upwards of 22,000 times against open interest of 2,607 contracts. Trading in the $12 strike calls appears to be mixed, with the bulk of the contracts changing hands at $1.10 each. Strategists purchasing $12 strike calls on Halcon may profit at expiration in January of 2015 should shares in the energy company gain roughly 70% to trade above $13.10.

ZMH - Zimmer Holdings, Inc. - Options changing hands on the maker of knee and hip replacement products are looking for shares in Zimmer Holdings, Inc. to potentially decline during the next few weeks. Shares in ZMH are up 1.0% on Tuesday morning to stand at $73.45 as of 11:10 a.m. ET. The most actively traded contracts as measured by volume on Zimmer this morning are the April $70 strike puts, with upwards of 2,800 lots in play versus open interest of 291 contracts. Time and sales data suggests the put options were purchased during the first 30 minutes of the trading day at an average premium of $0.40 apiece. Put buyers may profit if shares in the maker of orthopedic products decline more than 5.0% from the current price to breach the average breakeven point on the downside at $69.60 by April expiration. The April expiry puts expire the week prior to Zimmer's first-quarter earnings report next month. Shares in ZMH, up better roughly 9.0% year-to-date, last traded below $69.60 in January.

RFMD - RF Micro Devices, Inc. - Shares in the maker of semiconductor components increased as much as 10% today to $5.40 after the stock was upgraded to 'outperform' from 'perform' with a price target of $7.00 at Oppenheimer. Options traders positioning for shares in RF Micro Devices to extend gains during the next five months snapped up August expiry calls on the name this morning. Bullish bets looking for shares in RFMD to rise to the highest level since December of 2011 by expiration purchased some 2,300 calls at the Aug. $6.0 strike for an average premium of $0.35 apiece. Traders long the $6.0 strike calls may profit at expiration in the event that RFMD shares jump 17.5% during the next five months to trade above the breakeven price of $6.35.