Thursday Options Brief: MTB, SWY & SNE

 |  Includes: MTB, SNE, SWY
by: Interactive Brokers

M&T Bank Corp. (NYSE:MTB)Speculation surrounding ‘talks’ between MTB and Spain’s Santander to merge Santander’s U.S. operations with M&T Bank Corp. inspired frenzied call activity on the Buffalo, New York-based bank holding company and drove its shares up as much as 9.85% to an intraday high of $90.00. Bulls are positioning for continued appreciation in MTB’s shares in case there turns out to be truth to the unconfirmed rumors flying around town. Investors purchased at least 4,000 calls at the June $90 strike for an average premium of $0.61 per contract. Call buyers at this strike price make money only if shares of the underlying stock trade above $90.61 ahead of expiration tomorrow. More than 7,700 calls changed hands at the June $90 strike versus previously existing open interest of just 615 contracts. Call buying also took place at the July $90 strike where some 1,100 calls were picked up for an average premium of $3.25 per contract. Just 24 hours ago, the same July $90 strike call options cost a maximum of $0.75 per contract. Finally, other bullish players purchased approximately 1,900 calls at the higher July $95 strike for an average premium of $1.43 per contract. Investors long these higher-strike calls profit only if shares of MTB rally 7.14% over today’s intraday high of $90.00 to surpass the average breakeven point on the calls at $96.43 by expiration day next month. The demand for call options on MTB coupled with rampant speculation lifted MTB’s overall reading of options implied volatility 12% to 42.31% by 11:47 am (ET).

Safeway, Inc. (NYSE:SWY)Shares of the North American food and drug retailer are up 1.35% to stand at $21.57 as of 11:00 am (ET) after earlier rallying nearly 3.4% at the start of the trading session to touch an intraday high of $22.00. Bullish options traders burst straight out of the gate this morning to pick up call options in the July and September contracts. One optimistic individual purchased 2,000 calls at the July $22.5 strike for an average premium of $0.375 apiece. The plain-vanilla call buyer is prepared to make money on the acquisition as long as Safeway’s shares rally 6.05% from the current price of $21.57 and trade above the effective breakeven price of $22.875 by expiration day next month. Buying interest spread to the September $22.5 strike where it looks like one investor shelled out $1.00 per contract to take ownership of 1,000 call options. The individual responsible for the purchase profits only if the price of the underlying shares rises 8.95% to exceed the breakeven price of $23.50 by September expiration. The jump in demand for call options on Safeway, Inc. lifted the stock’s overall reading of options implied volatility 7.7% to 27.16% by 11:05 am (ET).

Sony Corp. (NYSE:SNE)The manufacturer of consumer electronics attracted the attention of bears in morning trading with the price of its shares edging 0.20% lower to $28.27 just after 11:20 am (ET). Pessimistic options players appear to be bracing for continue erosion in the price of the underlying stock by purchasing 2,000 puts at the October $27.5 strike for an average premium of $2.07 apiece. Investors long the puts make money if Sony’s shares plunge 10% from the current price to breach the average breakeven point to the downside at $25.43 by expiration day in October. The electronics maker’s shares have take a beating over the past couple of months and are currently trading 30.1% lower than its 52-week high of $40.45 attained on March 23, 2010. The put buying interest observed on the stock today suggests investors see the Sony’s shares heading further south. Although, Sony’s shares have not traded below the average breakeven price of $25.43 since July 29, 2009.