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Plains Exploration & Production Co. (NYSE:PXP) A large bullish options combination play yields maximum profits to its owner if shares in Plains Exploration & Production Co. rally more than 20.0% by November expiration. The oil and gas exploration and production company’s shares are up 6.6% at $25.44 this afternoon, bringing the stock’s gains in the past week to more than 20.0%. One strategist expecting the stock to continue its run-up initiated a three-legged spread in the November contract. The trader may be looking for shares to extend gains following the company’s third-quarter earnings report on November 4.

It looks like the bullish player sold 10,000 puts at the Nov. $22 strike for a premium of $0.96 each, in order to purchase a 10,000-lot Nov. $26/$31 call spread at a net premium of $1.47 apiece. The sale of the puts reduces the price tag on the debit spread to $0.51 each, thus preparing the strategist to profit should PXP’s shares increase 4.2% over the current price of $25.44 to surpass the effective breakeven point at $26.51 at expiration. Maximum potential profits of $4.49 per contract are available to the trader in the event that shares in Plains Exploration & Production Co. jump 21.8% to exceed $31.00 by expiration day next month. Shares in PXP last traded above $31.00 back on August 17. The stock has lost nearly 40.0% of its value since it secured a multi-year high of $41.96 on July 21.

Financial Select Sector SPDR ETF (NYSEARCA:XLF) Financials kicked off the new trading session with a bang, driving shares in the XLF up 4.05% to $12.31 by 11:55 am in New York. Signs of resolve from key European policymakers to tackle the region’s debt and banking crises on the heels of better-than-expected economic data points last week helped stocks extend recent gains today. The XLF has rallied 9.2% in the past week, but impending earnings from big banks spurred some strategists to snap up bearish put options on the ETF. Buyers of weekly puts on the XLF this morning may be positioning for possible disappointing results from JPMorgan Chase & Co. to rattle the sector’s resolve following the second-largest bank’s third-quarter report on Thursday.

One or more investors appear to have purchased some 9,600 puts at the Oct ’14 $12 strike for an average premium of $0.22 apiece. Put buyers may profit at expiration if shares in the fund fall 4.3% from the current price of $12.31 to breach the effective breakeven point on the downside at $11.78. Traders eyeing the Oct.’14 $12 strike put are not alone in their move for downside protection. Open interest patterns in the contract suggest traders picked up roughly 7,200 of the puts for an average premium of $0.32 each last week.

Tempur-Pedic International, Inc. (NYSE:TPX)Premium mattress and pillow producer, Tempur-Pedic International, popped up on our market scanners today following heavy trading in its put options. Shares in TPX are up 6.0% to stand at $59.55 in early-afternoon trade, less than two weeks before the Lexington, Kentucky-based company reports its performance for the third quarter. The stock was initiated with an ‘Overweight’ rating and share price target of $67.00 at Piper Jaffray today. More than 5,000 put options changed hands at the October $50 strike this morning against previously existing open interest of 346 contracts. It looks like the single largest print was initiated by an investor paying $0.85 per contract to buy 3,944 of the contracts traded today. The trader responsible for the transaction may be taking an outright bearish stance on the stock heading into earnings, or may be building up downside protection to hedge a long position in the underlying shares. Profits or downside protection kick in if shares in Tempur-Pedic drop 17.5% to breach the effective breakeven price of $49.15 at expiration. The stock slumped to a one-year low of $46.53 as recently as October 4.

Hewlett-Packard Co. (NYSE:HPQ)Buyers of call options on Hewlett-Packard are bullish on the prospects for the performance of Hewlett-Packard’s shares…through the end of this week, anyway. Shares in HPQ are up 2.75% this afternoon at $25.57, having gained roughly 20.0% since touching down at $21.50 on September 23, the lowest price for the stock since 2005. Investors expecting the rebound to continue exchanged more than 3,200 calls at the Oct. ‘14 $26 strike against open interest of 402 contracts. It looks like most of the calls were purchased for an average premium of $0.58 each. Call buyers profit if shares in HPQ rally another 3.95% to surpass the breakeven price of $26.58 at expiration day.

Source: Monday Options Brief: PXP, XLF, TPX & HPQ