Monday Options Update: DG, CBRL, M, TSN, NFLX & FUQI

|
Includes: CBRL, DG, FUQI, M, NFLX, TSN
by: Interactive Brokers

Dollar General Corp. (NYSE:DG)Shares in Dollar General Corp. rallied as much as 4.1% this afternoon to touch an intraday- and new 52-week high of $32.23 after fellow discount retailer, Dollar Tree, reported better-than-expected third-quarter earnings this morning. Dollar General appeared on our scanners after bullish players sold out-of-the-money put options in the December contract. Put sellers are suggesting shares in DG are likely to trade above $30.00 through expiration day next month. Dollar General reports third-quarter earnings ahead of the opening bell on December 9, 2010. Options traders sold more than 14,200 puts at the December $30 strike to pocket an average premium of $0.18 per contract. Put sellers keep the full premium received on the transaction as long as DG’s shares exceed $30.00 through December expiration. More than 16,000 put options changed hands at the December $30 strike versus paltry previously existing open interest of just 7 contracts at that strike. Overall options volume of 16,535 contracts generated on Dollar General today is far greater than total existing open interest on the stock of 10,451 lots before today. Options implied volatility on Dollar General is down 8.5% to arrive at 23.88% in late afternoon trading.

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)Near-term call options are in demand on the operator of retail and restaurant concept chain, Cracker Barrel, this afternoon. Shares in Cracker Barrel jumped 3.00% to $57.77, a new 52-week high for the stock, by 3:45 pm in New York. It looks like call buyers populating CBRL today expect shares to extend gains following the firm’s first-quarter earnings report before the opening bell tomorrow. Bulls scooped up roughly 1,100 calls at the December $60 strike for an average premium of $0.735 per contract. Investors holding these contracts are prepared to make money should shares in Cracker Barrel rally another 5.1% to surpass the average breakeven price of $60.735 ahead of December expiration. Options implied volatility on the stock is up 8.2% to stand at 31.24% on rising demand for options and the impending earnings release.

Macy’s, Inc. (NYSE:M) The holiday shopping season is heating up and options traders are placing bullish bets on department store operator, Macy’s Inc., by picking up out-of-the-money call options expiring in December. Shares of the second-largest U.S. department store chain are up 2.40% at $25.68 as of 11:55 am in New York just days before Black Friday when all Macy’s stores will open their doors at 4:00 am to attract bargain-hungry consumers on the most important shopping day of the year. Investors expecting shares in Macy’s to continue to rise ahead of expiration day next month purchased roughly 2,000 calls at the December $27 strike for an average premium of $0.45 per contract. Call buyers at this strike make money if the department store operator’s shares rally another 6.9% over the current price of $25.68 to trade above the average breakeven point at $27.45 by December expiration. Bulls scooped up another 1,700 calls at the higher December $28 strike at an average premium of $0.24 each. Investors holding these contracts are poised to profit should shares surge 10.0% to surpass the average breakeven price of $28.24 by expiration day. Nearly 1,000 call options were coveted up at the December $29 strike, where investor paid an average premium of $0.13 per contract. More than 1,500 calls changed hands at this strike versus previously existing open interest of just 92 contracts at that strike.

Tyson Foods, Inc. (NYSE:TSN)Shares of the largest meat processor in the U.S. are up 3.75% at $16.23 in early-afternoon trading, and earlier increased as much as 5.2% to hit an intraday high of $16.45, after the firm reported better-than-expected fourth-quarter earnings before the market opened this morning. Tyson Foods earned $0.57 a share in the quarter versus a net loss of $1.23 a share in the same period last year. Earnings from the meat processor were bolstered, in part, by increasing sales of prepared foods and pork products. One optimistic options investor initiated a put credit spread on the stock today, selling 8,000 puts at the January 2011 $15 strike for an average premium of $0.43 each, and buying the same number of puts at the lower January 2011 $12.5 strike at a premium of $0.10 apiece. The trader pockets a net credit of $0.33 per contract on the transaction, which he keeps as long as Tyson’s shares exceed $15.00 through expiration day in January. The investor receives the net credit in exchange for bearing the risk that Tyson’s shares fail to trade above $15.00 through expiration. The investor is vulnerable to losses in the event that shares decline 9.6% from the current price of $16.23 to breach the effective breakeven point at $14.67 by expiration day next year. The credit-spreader could absorb maximum potential losses of $2.17 per contract should shares in Tyson Foods plunge 23.0% to trade below $12.50 in the next could of months. The overall reading of options implied volatility on Tyson is down 16.2% at 32.89% as of 12:50 pm.

Netflix, Inc. (NASDAQ:NFLX)Shares of the online and mail-order movie rental company shot up as much as 8.5% this morning to touch an all-time high of $187.80 on news Netflix launched its first streaming-only subscription plan for $7.99 a month for U.S. customers to watch TV programs and movies online. Additionally, the California-based company announced it will raise the price of its combined streaming and mail-order plans. Bullish options traders flocked to weeklies on Netflix and are positioning for shares to climber higher still ahead of expiration on Friday. Call options are more popular than puts on NFLX this morning, with calls changing hands more than 1.65 times for each single put option in action today. Investors picked up at least 1,000 in-the-money calls at the November $185 strike for an average premium of $3.98 each, and scooped up at least 1,800 more calls up at the November $190 strike for an average premium of $2.22 apiece. Bullishness spread to the higher November $195 strike where approximately 1,000 calls were purchased at an average premium of $1.14 a-pop. Finally, the November $200 strike, the highest available strike price for options expiring on November 26, enticed call buyers who picked up some 1,200 lots at an average premium of $0.65 each.

Fuqi International, Inc. (OTCPK:FUQI) The designer of high quality precious metal jewelry in China popped up on our ‘hot by options volume’ market scanner today due to bullish activity in long-dated call options in the March 2011 contract. Shares in Fuqi International are up 4.35% to stand at $6.45 as of 12:55 pm in New York after earlier rallying as much as 5.825% to hit an intraday high of $6.54. More than 3,300 call options changed hands at the March 2011 $8.0 strike versus previously existing open interest of just 172 contracts. It looks like at least 1,600 of these call options were purchased for an average premium of $0.85 apiece. Call buyers make money if Fuqi’s shares surge 37.2% over the current price of $6.45 to surpass the average breakeven point at $8.85 by March expiration. It looks like investors purchasing out-of-the-money calls are positioning for FUQI shares to continue to rebound. The stock has encountered rough patches since the SEC called into question its untimely filing of statements.