Monday Options Brief: NTAP, LYV & SGEN

Includes: LYV, NTAP, SGEN
by: Interactive Brokers

NTAP – NetApp, Inc. – Options on the supplier of enterprise storage and data management software and hardware products and services are among the most active by volume today. Bearish positions are accumulating in the front month, with debit put spreads comprising the majority of overall options volume in the name. Shares in NetApp are currently down 1.1% to stand at $39.25 as of 1:20 p.m. ET, three days ahead of the Company’s third-quarter earnings report after the close on Thursday. The stock was cut to ‘hold’ from ‘buy’ with a share price target of $42.00 down from $54.00 at ThinkEquity today. It looks like one or more investors purchased the Feb. $34/$39 put spread roughly 9,000 times for an average premium of $1.72 per contract. Traders harnessing the strategy may be hedging long positions in the underlying shares or, alternatively, establishing outright bearish stances on the stock in the expectation that shares will pullback following earnings. Profits are available on the spread if shares in NetApp drop 5.0% to trade below the average breakeven price of $37.28. Put-spreaders could walk away with maximum potential profits of $3.28 per contract should NTAP’s shares plunge 13.4% to settle below $34.00 at expiration.

LYV – Live Nation Entertainment, Inc. – Put options on the live entertainment and eCommerce Company are more active than usual today, with more than 10 put contracts changing hands in the first half of the session for each single call option in play. Shares in the operator of are up 0.90% at $10.82 just before 12:00 p.m. in New York. Traders may be snapping up put options on Live Nation Entertainment ahead of the Company’s fourth-quarter earnings report next Thursday after the close. The April $10 strike saw the single largest transaction in LYV puts, with one investor buying a block of 9,577 of the contracts for a premium of $0.70 each. The put buyer may be taking an outright bearish stance on the stock through April expiration or hedging a long position in the underlying shares. If outright bearish, the investor stands prepared to profit in the event that Live Nation’s shares drop 14.0% to breach the effective breakeven price of $9.30 by expiration. Put volume at the April $10 strike is greater than 11,600 contracts versus open interest of just 146 positions.

SGEN – Seattle Genetics, Inc. – Shares in biotechnology firm, Seattle Genetics, Inc., are up 2.15% this afternoon at $19.00 ahead of the Company’s fourth-quarter earnings report after the closing bell. The stock popped up on our ‘hot by options volume’ market scanner in the first hour of the trading session due to heavier-than-usual activity in put options. Front month puts are the most actively traded contracts on Seattle Genetics thus far in the session, with the bulk of the volume changing hands at the Feb. $20 strike. It looks like one or more investors traded around 2,300 in-the-money puts at the $20 strike for an average premium of $1.60 per contract. A substantial portion of the puts were purchased, while the largest single trade – a block of 1,250 puts – traded to the middle of the market. Buyers of the put options may profit at expiration if SGEN’s shares drop 3.2% to settle below $18.40. However, if the large block of puts were sold rather than purchased by the investor, a run-up in the price of the shares to $20.00 or above results in maximum possible profits of $1.60 per contract on the position.