Thursday Options Brief: SKUL, LEAP & AET

 |  Includes: AET, SKUL, T
by: Interactive Brokers

SKUL - Skullcandy, Inc. - Bullish activity in Skullcandy call options this morning indicates shares in the maker of headphones and electronics accessories may rally in the near term. The stock had been on a tear, climbing more than 40.0% in the first four months of the year to touch a year-to-date high of $17.76 last Monday. Shares have since surrendered 12.0% of their value to trade at the current price of $15.60, but options players accumulating calls in the front month appear to be positioning for a rebound. Skullcandy reports first-quarter earnings after the final bell on May 2nd. The May $17.5 strike calls saw the most action, with more than 2,800 contracts changing hands in the first half of the session against open interest of 1,386 positions. It looks like the single largest trade in Skullcandy today was the purchase of a block of 1,744 $17.5 strike calls for a premium of $0.45 each. The trader holding the position stands prepared to profit at expiration in the event that SKUL shares surge 15.0% to top the effective breakeven price of $17.95. Call buying today follows similar bullish trading traffic in the contracts yesterday. Open interest in the May $15 and $17.5 strike calls suggests one or more traders purchased more than 500 lots at each strike on Wednesday.

LEAP - Leap Wireless International, Inc. - The wireless services provider's shares dropped 25.0% to an intraday low of $5.72 after the Company reported net subscriber gains were down 22.0% in the first quarter versus the same period last year. Trading traffic in the May expiry put options today suggests some traders are prepared should the selloff in Leap's shares continue in the near term. The stock is now off its lowest point of the session, though continues to trade 20.0% lower on the day at $6.16 as of 12:15 p.m. ET. Traders positioning for shares in LEAP to extend losses in the near term snapped up more than 3,400 put options at the May $5.0 strike for an average premium of $0.21 each. Put buyers make money if shares in the pay-as-you-go wireless provider decline another 22.2% to breach the average breakeven price of $4.79 by May expiration. Leap Wireless International posted a wider-than-expected first-quarter loss after the close on Wednesday, driving shares down to their lowest intraday level since October 2011.

AET - Aetna - Shares in the health insurer were slammed Thursday, falling 12.2% to an intraday low of $43.34, after first-quarter earnings failed to meet analyst expectations. Front month call buyers on Aetna this morning stand ready to benefit should the shares rebound in the near term. Traders eyeing the May $44 strike calls, where more than 1,300 contracts have traded against 23 open positions, purchased the majority of the contracts for an average premium of $1.08 each early in the session. The bullish strategy may be profitable at expiration next month if shares in the insurer rally 2.2% over the current price of $44.10 to trade above the average breakeven point at $45.08.