Wednesday Options Brief: JOSB, TRLG & SEE

Includes: JOSB, SEE, TRLG
by: Interactive Brokers

JOSB - Jos. A. Bank Clothiers, Inc. - Shares in the retailer of men's clothing and accessories jumped 19% today to an intraday and three-month high of $49.48 after the company posted better-than-expected second-quarter earnings and sales ahead of the opening bell. Some options players appear to be bulking up on bullish call options, perhaps in the expectation that shares in the clothing company have more room to run in the near term. Meanwhile, trading activity in JOSB options ahead of the earnings report suggests some traders are sitting on sizable paper profits following the big move in the price of the underlying shares. Upside call buyers took to the Sep. $50 strike today, exchanging upwards of 1,500 contracts versus previously existing open interest of 389 open positions. It looks like much of the volume was purchased for an average premium of $1.24 apiece, thus positioning buyers of the contracts to profit if JOSB shares rally another 3.6% over today's high of $49.48 to top the average breakeven price of $51.24 by expiration day next month. The Oct. $50 strike calls attracted buyers this morning, as well. Increases in open interest levels in the Sep. $40 and $45 strike calls overnight indicates positions were opened during Tuesday's session ahead of the earnings report on Wednesday. A review of time and sales suggests buyers snapped up around 200 of the Sep. $40 strike call at an average premium of $3.61 and purchased approximately 475 of the Sep. $45 strike calls for an average premium of $1.19 each yesterday. These deep in-the-money calls now trade at far higher premiums of $8.85 and $4.10 apiece, respectively.

TRLG - True Religion Apparel, Inc. - The designer and seller of apparel under the brand name True Religion Brand Jeans appeared on our 'hot by options volume' market scanner today due to heavy trading traffic in the October expiry puts. Shares in the producer of pricey pants are up 0.90% this afternoon at $22.95 as of 12:30 p.m. ET. The stock has been hit hard in 2012, down nearly 40% off the 52-week high of $37.82 reached back in February. Put buying on the name this morning indicates some traders may be positioning for further weakness in the price of the underlying going forward. The bulk of the options volume on TRLG is in the Oct. $23 strike put where approximately 2,000 contracts changed hands against open interest of 344 contracts. It looks like most of the puts were purchased for an average premium of $1.46 apiece to prepare for a decline of 6% or more in the share price in the next couple of months. Put buyers make money if shares in the name settle below the average breakeven price of $21.54 by October expiration. Bearish trading spread to the lower Oct. $20 strike where around 355 puts were purchased at a premium of $0.45 each. The price of True Religion shares would need to drop 15% from the current level in order for the position to make money beneath the breakeven point at $19.55 by expiration.

SEE - Sealed Air Corp. - Options on the maker of Bubble Wrap and other packaging products are more active than usual this morning on news the company tapped Dow Chemical Co. executive, Jerome Peribere, to replace the current CEO, William V. Hickey, next year. Shares in Sealed Air Corp. rallied as much as 11% on the news to hit an intraday high of $14.41, sparking upside call buying in the October expiry options. It looks like traders snapped up 3,000 calls at the Oct. $15 strike for an average premium of $0.39 apiece, and may profit at expiration in the event SEE shares tack on another 7% to top the breakeven price of $15.39. Some options traders getting long upside calls on the stock ahead of the news saw the value of their contracts rise sharply overnight. Strategists appear to have purchased around 400 of the Sep. $12.5 strike calls yesterday morning at a premium of $0.80 each. Premium on the Sep. $12.5 strike call more than doubled versus the price paid by traders Tuesday morning, with the current bid/ask on the contracts up at $1.65/$1.70 as of 11:55 a.m. ET. Overall options volume on Sealed Air Corp. exceeds 6,200 contracts as of midday versus the stock's average daily options volume of just 666 contracts.