Wednesday Options Brief: UPS, IYR, JACK & WFC

Includes: IYR, JACK, UPS, WFC
by: Interactive Brokers

United Parcel Service, Inc. (NYSE:UPS) – The package and freight delivery services firm attracted bullish options players today amid a 0.75% increase in its share price to $62.95. One investor sought longer-dated option contracts and established a bullish stance in the October contract. It looks like the trader purchased 3,500 call options at the October $67.5 strike for an average premium of $1.39 per contract. The optimistic investor profits if shares of the underlying stock rally at least 9.40% over the current price to breach the breakeven point on the calls at $68.89 by expiration day in October. Shares are knocking on the door of a 52-week high of $62.95 having earlier burst through to an intraday peak at $63.21.

iShares Dow Jones U.S. Real Estate Index ETF (NYSEARCA:IYR) – Shares of the IYR, an exchange-traded fund that tracks the price and yield performance of the Dow Jones U.S. Real Estate Index, are trading 0.80% higher today to attain a new 52-week high of $50.58. The increase in the value of the underlying shares allowed one options player to take profits on a previously established bullish position. The investor appears to have originally purchased 5,000 calls at the April $52 strike for an average premium of $0.15 apiece back on March 20, 2010, when shares were trading at $48.45. The subsequent 4.40% increase in the fund’s shares boosted option premium on the calls. Thus, the trader sold the 5,000 contracts for a premium of $0.43 apiece today, banking net profits of $0.28 each. Finally, the IYR-optimist extended bullish sentiment on the fund by establishing a fresh long-call position at the June $54 strike where he picked up 5,000 calls for an average premium of $0.79 per contract.

Jack in the Box, Inc. (NASDAQ:JACK) – Bullish investors gobbled up Jack in the Box call options today with shares of the underlying stock trading up 5.10% to $24.30. Options traders picked up 2,700 calls at the April $25 strike for an average premium of $0.55 per contract. Call-buyers in the restaurant owner are positioned to amass profits should JACK’s share price surpass the effective breakeven price at $25.55 by expiration day next month. Approximately 5,135 contracts changed hands on the stock thus far in the session, which is roughly 18.3% of total existing open interest on JACK of 28,008 lots. The surge in demand for options on Jack in the Box drove up the stock’s overall reading of options implied volatility 6.6% to 28.46% today.

Wells Fargo & Co. (NYSE:WFC) – Massive bearish put positioning in the April contract contrasts with the 0.65% rally in the financial holding company’s shares today to $30.47. It looks like one investor purchased 28,000 put options at the deeply out-of-the-money April $23 strike for a premium of $0.08 per contract. Other traders drove the total number of purchased puts at that strike up to 32,200 contracts picked up for an average volume-weighted premium of $0.07 apiece. Investors could be long shares of the underlying stock and merely scooping up cheap downside protection. However, the put action could also be the work of extremely bearish players looking to amass profits should Wells Fargo’s shares decline substantially ahead of April expiration.