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GPS - Gap, Inc. - Shares in clothing and accessories retailer, Gap, Inc., rallied to their highest level in more than a decade on an intraday basis this morning, rising 3.2% to $36.30 after the company reported a 9% increase in August same-store sales and handily beat average analyst expectations for a 5.5% increase in the metric. Options traders positioning for short-term share price appreciation in the largest U.S. specialty-apparel retailer on Wednesday ahead of the positive same-store sales report, in some cases saw the value of their bullish positions roughly double overnight. Open interest in the Aug. 31 '12 $35 strike calls increased by more than 6,200 contracts following yesterday's trading session, rising to total 6,752 open positions. A review of time and sales data from Wednesday's transactions in the $35 calls suggests most of the volume was purchased for an average premium of $0.66 apiece. The deep in-the-money calls are now changing hands with a last-traded price of $1.28 apiece, nearly twice what traders paid for the contracts yesterday. Volume in the $35 calls currently stands at 212 contracts as of 11:20 a.m. ET, indicating options traders are still holding their positions.

SHLD - Sears Holding Corp. - The department store operator's shares are getting hit hard today, down as much as 8.1% to $52.77, after Standard & Poor's announced Wednesday the stock will be dropped from the S&P 500 Index next week. Weekly put activity on Sears Holding Corp. early in the trading session suggests one or more options traders are positioning for the stock to extend losses ahead of the holiday weekend. Traders exchanged more than 1,500 puts at the Aug. 31 '12 $52.5 strike this morning against open interest of 487 contracts, and appear to have purchased most of the volume for an average premium of $0.35 apiece. Put buyers stand ready to profit at expiration in the event SHLD shares slip another 1.2% to breach the average breakeven point on the downside at $52.15. The stock is down nearly 40% off the March 16, 2012, 52-week high of $85.90, but remains up 65% year-to-date.

RKT - Rock-Tenn Co. - Packing products manufacturer, Rock-Tenn Company, popped up on our scanners this morning after one options market participant initiated a sizable bear put spread on the stock. Shares in the producer of recycled paperboard and corrugated packaging are off 0.40% today at $66.27 as of midday in New York. The trader responsible for the largest transaction in RKT options today may be taking an outright bearish stance on the stock, or could be hedging a long position in the underlying shares. It looks like the strategist purchased a 1,000-lot Oct. $60/$65 put spread for a net premium of $1.85 per contract, which yields profits - or downside protection - if shares in RockTenn decline 4.7% to breach the effective breakeven point at $63.15. Maximum possible gains of $3.15 per contract are available on the spread should the price of the underlying stock drop 9.5% from the current price of $66.27 to settle at or below $60.00 at October expiration. The company's Chairman and CEO, James A. Rubright, is scheduled to speak at the Bank of America Merrill Lynch 2012 Global Industrials & Materials Conference next Wednesday afternoon in Boston.

Source: Thursday Options Brief: GPS, SHLD & RKT