Thursday Options Brief: CSTR, YHOO & KO

Includes: AABA, KO, OUTR
by: Interactive Brokers

CSTR - Coinstar, Inc. - Options on Coinstar are more active than usual today ahead of the company's fourth-quarter earnings report after the close. Shares in the provider of Coinstar self-service coin-counting kiosks and Redbox self-service DVD and video game rental kiosks advanced up to 1.2% in the early going to touch $51.95, but currently trades flat on the session at $51.32 as of midday in New York. Sizable prints in February expiry call options on CSTR during the first 30 minutes of the trading day indicate one trader may be positioning for shares in Coinstar to rally sharply after earnings. It looks like the strategist purchased a 4,500-lot Feb. $57.5/$62.5 call spread at a net premium of $1.10 per contract. The spread makes money if shares in the name rally 14% over the current price of $51.32 to exceed the effective breakeven point at $58.60, with maximum potential profits of $3.90 per contract available on the position given a more than 20% upside move in the stock price to $62.50 by expiration next week. Shares in Coinstar last traded above $62.50 back in July 2012.

YHOO - Yahoo!, Inc. - Shares in Yahoo are bucking the trend today, up 0.65% at $19.98 as of 11:30 a.m., amid a down day for U.S. stocks. The company said yesterday it will begin working with Google's AdSense and AdMob services to increase revenue from content on its sites. The Internet media company was raised to 'Buy' from 'Hold' with a 12-month target share price of $23.00 at Pivotal Research Group LLC today. Trading traffic in YHOO calls suggests some strategists are positioning for the price of the underlying to extend gains in the near term. Cheap upside bets are building at the Feb. 08 '13 $20.5 strike where upwards of 3,500 weekly puts changed hands against open interest of 123 contracts. It looks like most of the calls were purchased in the early going for an average premium of $0.06 each. Traders long the calls lose their investment of $0.06 per contract if shares settle below $20.50 and the options expire worthless at the end of the trading week. Meanwhile, like-minded bulls looked to the Feb. 15 '13 $20.5 strike, trading more than 5,000 call options against zero open positions. Time and sales data indicates traders paid an average premium of $0.21 per contract to buy most of the volume. Call buyers stand ready to profit at expiration next week should shares in Yahoo rally 3.7% to surpass the breakeven price of $20.71.

KO - Coca-Cola Co. - Bullish options are changing hands on Coca-Cola Co. today, with shares in the world's largest beverage maker up 1.3% on the session at $38.81, and the company's fourth-quarter earnings report coming up next Tuesday ahead of the open. Fresh positioning in the Mar. $40 strike calls in the early going on Thursday suggests some traders may be preparing for the price of the underlying to rally to the highest level in six months by March expiration. More than 7,300 calls have changed hands at the Mar. $40 strike against previously existing open interest of 533 contracts. It looks like most of the volume was purchased for an average premium of $0.25 per contract, thus preparing upside call buyers to profit in the event that KO's shares advance 3.7% from the current price of $38.81 to surpass the average breakeven point at $40.25 by expiration next month.