iRobot Bulls Clean Up As Shares Soar After Earnings

| About: iRobot Corporation (IRBT)

IRBT – iRobot Corporation – Shares in the maker of home robots such as the Roomba vacuum cleaner and defense and security robots for military uses are soaring on Wednesday, up as much as 17% to touch a new 52-week high of $28.85, after the company posted first-quarter earnings and sales that exceeded analyst expectations. The sharp move in the price of the underlying sparked heavy trading traffic in iRobot options in the early going. Bullish bets initiated yesterday on iRobot prior to the company’s earnings release are generating sizable paper profits for some traders today. It looks like traders yesterday snapped up around 500 calls at the May $25 strike for an average premium of $1.35 per contract. The sharp rally in the price of the underlying overnight now finds the contracts changing hands at $3.50 apiece as of 11:40 a.m. ET. Options traders establishing near-term bullish bets on iRobot today looked to the May $30 strike and purchased around 350 calls for an average premium of $0.49 each during the first half of the trading session. Finally, buyers of downside put options yesterday prior to the earnings release saw the value of their contracts collapse overnight. More than 600 puts were purchased at the May $25 strike on Tuesday for an average premium of $1.78 per contract. Double-digit percentage gains in the share price today now finds the price tag on the $25 puts down at $0.20 each as of the time of this writing.

AIG – American International Group, Inc. – Upside call options are changing hands on American International Group, Inc. today as shares in the name rally for a second-consecutive session on speculation the insurer may resume dividend payments. Life insurer, MetLife Inc., yesterday announced it would increase its quarterly dividend for the first time since 2007. Shares in AIG are up more than 3.0% this afternoon at a new two-year high of $41.88 as of midday in New York. The company reports first-quarter earnings next Thursday. Trading traffic in weekly options on AIG indicates some strategists are positioning for the price of the underlying to continue higher during the next couple of trading sessions. Volume in weekly options is greatest at the Apr 26 ’13 $41.5 strike where upwards of 2,000 calls have traded against open interest of 658 contracts. Time and sales data suggests the bulk of the $41.5 strike calls were purchased for an average premium of $0.35 each. Call buyers may profit at expiration this week in the event that AIG’s shares top the breakeven price of $41.85.

GLW – Corning, Inc. – Shares in high-performance glass manufacturer, Corning, Inc., rallied 5.0% today to $13.82 after the company reported first-quarter profit that exceeded average analyst estimates, increased its quarterly dividend by one penny and announced a $2 billion stock-buyback plan. Big prints in August expiry calls today, however, suggest the stock, which today trades at the highest level since October of 2012, bet the shares are unlikely to breakout front here during the next four months. It looks like one trader sold around 65,000 calls at the Aug $14 strike, pocketing an average premium of $0.49 per contract. The strategist keeps the full amount of premium as long as the calls expire worthless at August expiration. Perhaps the call seller is long the stock, and willing to have a hefty chunk of shares called from him or her at expiration. Shares in Corning bumped up against resistance in the mid-$14 level around this time last year and have not managed to top $14.00 since May of 2012.