Thursday Options Brief: RF, NTAP & BPOP

 |  Includes: BPOP, NTAP, RF
by: Interactive Brokers

Regions Financial Corp. (NYSE:RF) Investors initiated bullish trading tactics on Regions Financial this morning with shares of the banking and financial services firm higher by 4.60% to $7.74 as of 10:35 am (ET). Options players anticipating continued appreciation in the price of the underlying stock through June expiration purchased plain vanilla debit call spreads. Investors picked up roughly 6,000 calls at the June $8.0 strike for an average premium of $0.23 apiece, and sold about the same number of calls at the higher June $9.0 strike for an average premium of $0.03 each. The average net cost of the transaction amounts to $0.20 per contract. Call-spreaders make money if Regions’ shares rally another 5.95% over the current price of the stock to surpass the average breakeven point at $8.20. Maximum potential profits of $0.80 per contract are available to RF-bulls if shares of the banking-related services company jump 16.3% to exceed $9.00 by expiration day next month. Regions’ shares last traded over $9.00 back on April 26, 2010, when the stock touched an intraday high of $9.05.

NetApp, Inc. (NASDAQ:NTAP)Shares of the supplier of enterprise storage and data management software, as well as hardware products and services, are soaring 17.55% higher this morning at a new 52-week high of $38.12 as of 11:00 am (ET). NetApp’s shares jumped after the firm posted fourth-quarter adjusted earnings of $0.50 a share, which blew right past average analyst forecasts of $0.43 a share. Investors looking to lock in the sharp rally in the price of the underlying shares purchased approximately 3,800 July $37 strike puts at an average premium of $2.13 per contract. The put options provide downside protection in case shares reverse direction ahead of July expiration. Downside protection in this case kicks in if NetApp’s shares fall 8.525% from the current price of $38.12 to breach the average breakeven point on the puts at $34.87 by expiration day.

Popular, Inc. (NASDAQ:BPOP) The Puerto Rico-based banking services company’s shares commenced the trading session in the red, but quickly rebounded up 1.40% to stand at $2.94 as of 10:45 am (ET). Perhaps the initial decline in the price of the underlying shares inspired the bearish options activity observed in the October contract. It looks like one pessimistic trader sold 5,000 calls outright at the October $3.0 strike to take in a premium of $0.45 per contract. The investor keeps the premium pocketed on the transaction as long as Popular’s shares do not exceed $3.00 by expiration day. If the responsible party is not currently holding a large underlying share position then the short stance in calls is a risky proposition should BPOP’s shares rally ahead of expiration. The investor faces potentially unlimited losses to the upside if Popular’s shares increase 17.35% over the current price to exceed the breakeven point at $3.45. Alternatively, the trader may be selling covered calls. In this case, the investor is apparently happy to have 500,000 shares of the underlying stock called from him at $3.00 if the contracts land in-the-money at expiration.