Wednesday Options Brief: P, NXPI & CQB

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Includes: CQB, NXPI, P
by: Interactive Brokers

P – Pandora Media, Inc. – Shares in the Internet radio provider are on a tear this year, having rallied nearly 30.0% since the final trading session of 2011. The stock is up 8.1% at $13.06 today, although it’s worth noting the stock trades below its June IPO. Put activity on the music media company this morning suggests at least one strategist does not expect the music to stop in the near future. Investors exchanged more than 3,200 puts at the Feb. $10 strike against open interest 563 contracts, indicating the positions were opened. It looks like most of the put options were sold for an average premium of $0.25 each. Put sellers walk away with the full amount of premium at expiration next month as long as shares in Pandora Media, Inc. exceed $10.00. The strategy could saddle sellers of the options with shares of the underlying stock at February expiration in the event of a sharp pullback below the strike price. Premium received on the play provides limited protection against losses should shares tank, however, traders start to see losses on the downside should the stock drop 25.0% to trade below the effective breakeven price of $9.75 at expiration day. The put contracts expire ahead of the Company’s March 1 fourth-quarter earnings release.

NXPI – NXP Semiconductors NV – Call options on the semiconductor supplier are more active than usual this morning, with shares in the Eindhoven, The Netherlands-based Company soaring 14.7% to an intraday high of $19.72. Traders appear to be placing bullish bets on NXPI today, snapping up in- and out-of-the-money call options to position for shares to extend gains in the near term. Meanwhile, some call buyers that purchased calls ahead of the New Year saw the value of their options surge. More than 5,000 contracts changed hands on NXP Semiconductors by 1:00 p.m., with roughly 15 calls in play on the stock for each single put option traded. Fresh bullish positions were initiated at the Feb. $17.5 strike, where 2,130 in-the-money calls traded against open interest of 379 contracts. It looks like most of the options were purchased by one strategist for an average premium of $1.65 each within the first 10 minutes of the opening bell. The sharp intraday rally in NXPI shares lifted premium required to buy the Feb. $17.5 strike call to $2.70 this afternoon. Traders having purchased around 3,000 of the February $15 strike calls back on December 22 for an average premium of $1.90 each currently find a $4.70 price tag to buy those contracts just four weeks later. The global semiconductor company and supplier to Apple Inc. reports fourth-quarter earnings after the final bell on February 9.

CQB – Chiquita Brands International, Inc. – Options players are nibbling at Chiquita call options today, with shares in the banana producer trading up sharply by 7.7% to stand at $8.94, the highest since mid-November, in early-afternoon trade. Trading traffic is heaviest out at the Aug. $9.0 strike where some 3,200 calls have changed hands. The majority of the call options appear to have been purchased by one investor for an average premium of $1.15 per contract in the first half of the session. Intraday gains in Chiquita shares and the uptick in implied volatility on the stock has the price tag to buy these calls up at $1.45 apiece as of 12:20 p.m. in New York. Chiquita Brands International, Inc. is scheduled to report fourth-quarter earnings after the close of trading on February 29.