Monday Options Brief: CASY, RMD, PG & STEC

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 |  Includes: CASY, PG, RMD, STEC
by: Interactive Brokers

Casey’s General Stores, Inc. (NASDAQ:CASY) Shares of the operator of convenience stores located in nine Midwestern states slipped slightly by 0.25% in the first half of the trading session to stand at $35.75 by 12:00 pm (ET). Casey’s General Stores’ shares are perhaps lower today after the firm reiterated its recommendation that shareholders not tender their shares into Alimentation Couche-Tard Inc.’s $36.00 per share extended offer. One options investor expecting Casey’s shares to continue to decline ahead of August expiration purchased a plain-vanilla debit put spread on the stock. The trader picked up 3,419 puts at the November $35 strike for a premium of $1.90 each, and sold the same number of puts at the lower November $30 strike for a premium of $0.60 apiece. Net premium paid to purchase the spread amounts to $1.30 per contract. Thus, the bearish strategist is prepared to make money as long as CASY’s shares fall 5.7% from the current price of $35.75 to breach the effective breakeven point on the spread at $33.70. The investor walks away with maximum potential profits of $3.70 per contract should shares of the underlying stock plunge 16.1% from the current price to trade below $30.00 by August expiration day. The overall reading of options implied volatility on the stock dropped 10.1% during the session to stand at 19.43% as of 12:10 pm (ET).

ResMed Inc. (NYSE:RMD)A thee-legged bearish options transaction pushed the manufacturer and distributor of medical equipment for treating, diagnosing and managing sleep-disordered breathing and other respiratory disorders onto our ‘hot by options volume’ market scanner this morning. The strategist responsible for enacting the pessimistic play essentially sold call options to finance the purchase of a debit put spread in order to prepare for shares of the underlying stock to decline ahead of August expiration day. RedMed’s shares are currently trading higher by 1.1% to stand at $65.65 as of 12:15 pm (ET). The bearish trader purchased 1,000 puts at the August $60 strike at a premium of $1.00 apiece, sold 1,000 puts at the lower August $55 strike for a premium of $0.25 each, and sold 1,000 calls at the August $70 strike at a premium of $100 a-pop. The investor pockets a net credit of $0.25 per contract on the transaction, and keeps the full amount as long as RedMed’s shares fail to rally above $70.00 ahead of expiration day next month. Additional profits accumulate if the medical equipment manufacturer’s shares fall 8.60% to trade below $60.00 by expiration. Maximum potential profits, including the credit received today, of $5.25 per contract are available to the options strategist should RedMed’s shares plummet 16.2% to trade at or below $55.00 by expiration day in August.

The Proctor & Gamble Co. (NYSE:PG)Options investors are augmenting bullish stances on the global provider of branded consumer packaged goods today with shares of the underlying stock inching 0.25% higher to stand at $61.91 by 12:25 pm (ET). It looks like bullish players expecting PG’s shares to rally significantly by expiration purchased some 18,100 calls at the August $65 strike for an average premium of $0.22 apiece back on Thursday July 8, 2010. Today, options optimists continued this trend by picking up approximately 16,500 calls at the August $65 strike for an average premium of $0.25 per contract. Investors buying the August $65 strike calls today are poised to profit should PG’s shares surge 5.40%, surpass the current 52-week high on the stock at $64.58, and finally trade above the average breakeven price of $65.25 by expiration day next month. The increase in investor demand for call options on the stock lifted Proctor & Gamble’s overall reading of options implied volatility 4.1% to 18.33% as of 12:30 pm (ET).

STEC Inc. (NASDAQ:STEC) An upgrade of the provider of enterprise-class Flash solid-state drives to ‘buy’ from ‘hold’ at ThinkEquity LLC this morning catalyzed a 7.00% rally in the price of STEC’s shares to an intraday high of $15.78. But, it seems the sharp rally was short-lived with the price of the underlying shares currently up just 0.40% to stand at $14.81 as of 12:35 pm (ET). Investors expecting the increase in share price to last earlier purchased July contract call options to position for continued appreciation ahead of expiration on Friday. Bullish players picked up 1,100 calls at the July $15 strike for an average premium of $0.68 apiece, thus positioning buyers to profit should STEC’s shares trade above $15.68 by July expiration day. Optimism spread to the higher July $16 strike where 1,100 calls were purchased at an average premium of $0.23 each. Call buyers at this strike price make money if STEC’s shares surge 9.6% over the current price of $14.81 to trade above the effective breakeven point to the upside at $16.23 by expiration day. Options implied volatility on the stock jumped 11.5% to 72.20% just before 12:45 pm (ET).