Monday Options Brief: ABV, SYY & RDEA

Includes: ABEV, RDEA, SYY
by: Interactive Brokers

ABV - Ambev - Stocks across the board are selling off today on renewed European concerns and disappointing data points out of China and Europe, but the pullback appears not to have deterred some optimism in options on the world's fourth-largest brewer, Ambev. The sizable options play on ABV, which is majority-owned by Anheuser-Busch InBev, suggests the strategist is positioning for shares in the name to hit new all-time highs by May expiration. The transaction this morning looks nearly identical to a spread initiated on Ambev on Friday afternoon when the stock touched a record high of $44.63. Shares in the distributor of Stella Artois and Beck's in Latin America are down 2.6% this afternoon to stand at $43.04 as of 12:25 p.m. in New York. The options trades established this morning and on Friday reduce the cost of upside exposure to the stock ahead of the brewer's first-quarter earnings report next week. The transaction this morning involved the sale of 3,000 puts at the May $39 strike against the purchase of the same number of calls at the May $48 strike for a net credit of $0.10 apiece. Friday's trade, the sale of 3,000 May $40 strike put options against the purchase of 3,000 May $48 strike calls, was initiated at zero cost to the trader. The investor responsible for the trade this morning keeps the full $0.10 net credit as long as shares exceed $39.00 through expiration while additional profits are available to the upside should the stock surge 11.5% to top $48.00.

SYY - Sysco Corp. - Food distributor, Sysco Corp., popped up on our 'hot by options volume' market scanner this morning after a large number of put options were purchased in the front month. The influx of protective positioning may be a knee-jerk reaction to the pullback in the stock and the broader market this morning, or a pre-earnings bearish bet ahead of the Company's third-quarter results due out on May 7th ahead of the opening bell. Shares in Sysco Corp. are down 1.75% at $28.52 this afternoon. Approximately 5,700 puts changed hands at the May $28 strike against open interest of 4,192 positions in the first 30 minutes of the trading session. It looks like most of the contracts were purchased at an average premium of $0.45 apiece, thus positioning buyers of the put options to profit should shares in SYY slide 3.4% lower to breach the average breakeven point on the downside at $27.55 by May expiration.

RDEA - Ardea Biosciences, Inc. - A timely bullish options play initiated on Ardea Biosciences on Friday appears to have resulted in big profits given the more than 50.0% rally in the stock today on news AstraZeneca Plc will acquire the biotechnology company for $32.00 a share or $1.26B. Shares in San Diego, California-based Ardea are currently up 51.6% at $31.60 as of 11:40 a.m. ET. Open interest in front month call options on RDEA jumped the afternoon of Friday April 20th after a block of 100 calls changed hands at the May $22.5 strike. It looks like the trader initiating the position purchased the contracts at a premium of $0.54 each. AstraZeneca's announcement today sent Ardea's share price flying, lifting premium on the now deep in-the-money call options to an intraday peak of $9.10. A block of 100 $22.5 strike calls sold this morning at a premium of $8.90 per contract. If Friday's call buyer is responsible for this morning's 100-lot sale, the return on that position amounts to a cool $8.36 per contract. Ardea Biosciences is scheduled to report first-quarter earnings ahead of the opening bell on May 4th.