Tuesday Options Brief: ORCL, KFT, CLF, JPM, JCP, MCD, ROK, HK, TIE & LXK

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 |  Includes: CLF, HK, JCP, JPM, LXK, MCD, MDLZ, ORCL, PCP, ROK
by: Interactive Brokers

Oracle Corp. (NYSE:ORCL) – Options players are initiating bullish stances on software development firm, Oracle Corp., today ahead of the company’s third-quarter earnings report scheduled for Thursday after the closing bell. Oracle’s shares rallied 0.95% during the current session to trade at a new 52-week high of $25.80. Medium-term optimists scooped up 10,600 call options at the June $28 strike for an average premium of $0.37 per contract. Perhaps plain-vanilla call buyers foresee continued bullish movement in the price of Oracle’s shares through expiration in June. Investors long the calls accrue profits if shares of the underlying stock surge 10% from the current price to breach the breakeven point at $28.37 by expiration day.

Kraft Foods, Inc. (KFT) – Voracious investor appetite for call options on Kraft Foods this afternoon pushed the KFT ticker symbol onto our ‘most active by options volume market scanner’ as shares of the U.S. food maker jumped 2.25% to a new 52-week high of $30.40. It looks like one particularly bullish individual satisfied his hunger for Kraft-calls by purchasing a large chunk of 16,000 contracts at the September $32 strike for a premium of $0.69 apiece. The investor holding the call options is prepared to reel in profits on the position if Kraft’s shares rally another 7.50% from the current value to surpass the breakeven price of $32.69 by expiration day in September.

Cliffs Natural Resources, Inc. (NYSE:CLF) – Shares of iron ore pellet producer, Cliffs Natural Resources, jumped more than 6.00% during the trading day to arrive at a fresh 52-week high of $69.34. Investors celebrated Cliffs’ new high by enacting a plethora of bullish options strategies on the stock. One such individual established a ratio risk reversal in order to cover the cost of taking a long position in Cliffs-calls. The optimistic trader sold 1,500 deep in-the-money put options at the July $75 strike for a premium of $11.50 per contract, and purchased 3,000 calls at the same strike for an average premium of $4.51 each. The reversal player pockets a net credit of $2.48 per contract on the transaction, which he keeps if shares of the underlying stock rally up to or above $75.00 by expiration. Additional profits also accumulate for the trader should shares breach the effective breakeven price of $75.00. Other bullish investors initiated plain-vanilla call buying across several contracts on Cliffs Natural Resources today.

JPMorgan Chase & Co. (NYSE:JPM) – Massive bullish positioning in the near-term April contract on investment banking firm, JPMorgan Chase & Co., suggests one big options player is expecting to see continued share price appreciation through expiration next month. JPM’s shares rallied 1.60% during the current session to arrive at $44.44. The optimistic trader purchased 40,000 now in-the-money call options for a premium of $1.20 per contract, at 10:02 am (NYSE:ET) this morning, when shares of the underlying stock were trading at $43.97. Shares have since surged to an intraday high of $44.51, boosting the asking price on the April $44 strike call options 35% higher to a current value of $1.41 per contract. The individual holding the 40,000 long calls could technically take net profits of $800,000.00 by selling the contracts for a net gain of $0.20 per contract. But, perhaps the trader expects to reel in more substantial profits on the position should JPMorgan’s shares to continue to rally higher ahead of expiration day.

J.C. Penney Co., Inc. (NYSE:JCP) – The department store operator’s shares surged 4.15% to $33.28 today prompting one investor to take profits on a previously established bullish call position. It appears the trader originally purchased roughly 8,500 call options at the now in-the-money April $32 strike price for an average premium of $0.68 apiece back on March 18, 2010, when shares of the underlying stock were trading at $31.17. JCP’s shares increased 6.75% from $31.17 up to today’s price of $33.28, which boosted premium levels on the now in-the-money April $32 strike call options. Thus, the investor was able to sell the calls today for an average premium of $1.36 apiece and take in net profits of $0.68 per contract. The bullish investor also extended optimistic sentiment on J.C. Penney by buying a fresh batch of 8,500 in-the-money call options at the higher April $33 strike for a premium of $0.82 each. Profits accumulate on the new call position if the JCP’s shares rally through the breakeven price of $33.82 ahead of expiration day in April.

McDonald’s Corp. (NYSE:MCD) – Investors initiated bullish options trading strategies on McDonald’s today after the firm revealed its sales in Latin America climbed to $3.6 billion, which is greater than the firm had anticipated. Shares of the largest restaurant company on the planet commenced the trading session on the plus side but slipped 0.15% by midday to stand at $66.91. One long-term optimistic trader established a bullish risk reversal on the stock in the January 2011 contract in order to partially reduce the cost of purchasing in-the-money call options. The investor shed 10,000 puts at the January 2011 $50 strike for a premium of $0.66 per contract to buy the same number of in-the-money call options at the higher January 2011 $65 strike for $4.86 apiece. Net premium paid for the reversal play amounts to $4.20 per contract. Thus, the investor is positioned to profit should McDonald’s share price rally 3.40% from the current price to breach the effective breakeven point to the upside at $69.20 ahead of January expiration day.

Rockwell Automation, Inc. (NYSE:ROK) – The global provider of industrial automation power, control and information solutions enticed bullish options players to the field today amid a 1% rally in its shares to $56.41. Near-term optimistic individuals picked up 4,000 call options at the April $60 strike for an average premium of $0.37 per contract. Call-buyers realize profits only if Rockwell’s shares increase 7% over the current price to exceed the breakeven point on the calls at $60.37 by expiration day next month. The sharp rise in demand for options on Rockwell Automation today lifted the stock’s reading of overall options implied volatility 13.7% to 27.6% as of 12:30 pm (ET).

Petrohawk Energy Corp. (NYSE:HK) – Bullish options investors greeted the current trading session with a renewed sense of optimism on independent oil and gas exploration company Petrohawk Energy Corp., as shares its shares rebounded from declines experienced during the previous session to stand 3.50% higher at $20.27. Optimistic traders purchased debit call spreads in the June contract to position for continued bullish movement in the price of the underlying shares through expiration. Early morning movers picked up 8,000 calls at the June $21 strike for a premium of $1.25 apiece, spread against the sale of 8,000 calls at the higher June $25 strike for $0.30 each. Net premium paid for the bull call spread amounts to $0.95 per contract. Investors stand ready to accrue maximum potential profits of $3.05 per contract if Petrohawk’s share price increases 23.33% over the current value of the stock to $25.00 by June expiration day.

Titanium Metals Corp. (TIE) – Call options on the producer of titanium sponge, melted products, and various mill products for commercial aerospace, military and industrial applications, are flying off the shelves this morning. Bullish investors swarmed the options field as Titanium Metals’ shares jumped 7.6% in early trading to reach a new 52-week high of $16.03. TIE’s shares tapered off slightly, but are still up 6.85% to $15.92 as of 10:45 am (ET). Options players purchased at least 12,800 call options at the April $16 strike for an average premium of $0.52 per contract. Investors holding these contracts stand ready to amass profits if TIE’s share price rallies another 3.75% to breach the breakeven point at $16.52 by April expiration. Optimistic individuals also picked up 1,100 calls at the higher April $17.5 strike for an average premium of $0.21 each. Uber-bulls long the higher-strike calls profit if the titanium producer’s shares surge 11.25% to surpass the effective breakeven price of $17.71 by expiration day. Options implied volatility on Titanium Metals Corp. is up 7.4% to 46.40% as of 10:50 am (ET).

Lexmark International, Inc. (NYSE:LXK) – Shares of the manufacturer of printing and imaging products are trading 2.20% higher this morning to $35.66. The rally in the price of the underlying stock inspired bullish options trading activity in the April contract. Investors breakfasted on 2,400 in-the-money calls at the April $35 strike for which they paid a net premium of $1.35 apiece. Call buying continued at the higher April $40 strike where 3,000 contracts were coveted for a premium of $0.21 each. In-the-money call buyers realize profits if Lexmark’s shares surpass the breakeven price of $36.35 ahead of expiration day. Bullish traders long the April $40 strike calls profit only if LXK shares surge 12.75% from the current price to surpass the effective breakeven price of $40.21 by April expiration. The increase in demand for call options on the printing products maker boosted the stock’s reading of overall options implied volatility 4.7% to 36.65% in the first half of the trading session.