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AOL - AOL, Inc. - Put activity on AOL this morning may be the work of one strategist locking in gains on the high-flying stock. Shares in AOL, up roughly 175% since October 2011, are currently down 1.8% on the day to stand at $35.92 as of 11:20 a.m. ET. The largest trade in AOL options this morning was the purchase of 4,500 of the Nov. $34 strike put for a premium of $0.80 per contract. The options trade does not appear to have been tied to stock, although the put buyer may be establishing downside protection to hedge an existing long position in the shares. Alternatively, the sizable transaction could be an outright bearish bet that shares will decline in the near term, perhaps in the aftermath of the company's third-quarter earnings report on October 31st. The position makes money if shares in AOL drop 7.5% from the current level to breach the effective breakeven price of $33.20 by November expiration.

EXPR - Express, Inc. - Options in play on Express this morning suggests shares in the apparel retailer, hard hit in recent months and sitting at all-time lows, may stage a significant turn-around in the next six months. Express shares, down nearly 60% from a March 2012 peak of $26.27, fell 2.35% in the first half of the trading session to $11.23 by 11:35 a.m. in New York. Upside call buying at the April 2013 $15 strike, where some 2,300 contracts were picked up for an average premium of $0.73 apiece, suggests at least one trader is positioning for EXPR shares to potentially increase sharply by expiration next year. The calls may be profitable at April expiration in the event that Express, Inc. shares jump 40% to exceed the average breakeven price of $15.73. The specialty retailer reports third-quarter earnings ahead of the opening bell on November 28th.

XLF - Financial Select Sector SPDR - A large bearish spread established on the XLF on Tuesday prepares one large options market participant for a near 20% pullback in the price of the underlying fund during the next three months. Shares in the ETF are roughly flat on the day, down 0.05% at $15.95 as of 11:50 a.m. ET. The strategist on Tuesday afternoon purchased an 80,000-lot Jan. 2013 $13/$15 put spread at a net premium outlay of $0.27 per contract. Profits accrue on the downside in the event that shares in the XLF decline 8% to breach the effective breakeven price of $14.73, with maximum possible gains of $1.73 per contract available on the spread given an 18.5% decline to $13.00 by January expiration. Companies that make up the top 10 holdings in the fund, including Wells Fargo & Co., Berkshire Hathaway Inc. and JPMorgan Chase & Co., are all scheduled to report third-quarter earnings within the next three weeks.

Source: Wednesday Options Brief: AOL, EXPR & XLF