Wednesday Options Brief: COCO, IPXL & BEN

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Includes: BEN, COCO, IPXL
by: Interactive Brokers

COCO – Corinthian Colleges, Inc. – Shares in the for-profit provider of post-secondary, career-oriented education programs increased as much as 44.2% to an intraday high of $4.37 at the start of the session after the Company’s full-year 2012 earnings forecast of $0.30 a share beat average analyst expectations of $0.24 a share. The stock is off earlier post-earnings report highs, but continues to trade up 30.0% on the day at $3.93 as of 12:30 p.m. in New York. Options traders positioning for shares in Corinthian Colleges to extend gains in the near term purchased more than 2,800 calls at the Feb. $4.0 strike for an average premium of $0.27 apiece. Investors long the calls may profit at February expiration in the event that COCO’s shares rally 8.7% over the current price of $3.93 to exceed the average breakeven point at $4.27. Bullish call buying spread to the Mar. $4.0 strike, where around 375 contracts were purchased for an average premium of $0.38 each.

IPXL – Impax Laboratories, Inc. – The specialty pharmaceutical company popped up on our ‘hot by options volume’ market scanner this morning after one strategist took a large stake in front-month calls. Shares in Impax Laboratories surged 10.85% to $20.93 today on news Impax Pharmaceuticals, the branded drugs unit of Hayward, California-based Impax Laboratories, Inc., licensed exclusive U.S. commercial rights to Zomig® from AstraZeneca. Zomig is a drug used to treat acute migraine headaches with or without aura. The options trader responsible for the single largest transaction in IPXL options today appears to have purchased 2,000 calls at the Feb. $20 strike for an average premium of $0.80 per contract. The size of the position is noteworthy relative to overall open interest of 3,355 contracts on the stock. The trader may profit on the position in the event that shares in Impax Laboratories exceed the effective breakeven price of $20.80 at expiration. Front-month call options expire ahead of the Company’s fourth-quarter earnings report on February 28.

BEN – Franklin Resources, Inc. – The global investment management organization saw heavier-than-usual activity in March expiry call options this morning, following the release of first-quarter earnings ahead of the opening bell. Shares in Franklin Resources rallied 3.6% in early-afternoon trade to $109.93 though the Company reported a 4.1% decline in fiscal first-quarter profits. With the earnings release complete, and the stock trading up nearly 15.0% since the start of the New Year, it looks like one strategist is betting the rally may be running out of steam. More than 1,950 calls changed hands at the Mar. $115 strike against open interest of 274 contracts. It looks like nearly all of the call options were sold for an average premium of $1.31 apiece. The trader walks away with the full amount of premium in hand at March expiration as long as shares in Franklin Resources settle below $115.00. If the investor is naked short the calls – which he may or may not be – the position is risky given exposure to uncapped losses above the effective breakeven share price of $116.31. BEN’s shares last traded above $116.31 back on September 20, 2011.