PNC Calls Rise at Midday Despite Downturn

Your midday options trading update.

PNC Financial Services Group, Inc. (NYSE: PNC)Shares in the financial services firm are down 1% at $60.34 in early-afternoon trade, but activity in May contract call and put options suggests one strategist sees shares in PNC rising sharply in the next few months. The three-legged bullish player appears to have sold 5,000 PNC May 55 Puts for a premium of $1.39 each, purchased the same number of PNC May 62.5 Calls for a premium of $2.15 per contract, and shed 5,000 PNC May 67.5 Calls at a premium of 68 cents a pop. The options trader paid a net premium of 8 cents per-contract for the transaction, and stands ready to profit should PNC’s shares reverse course and rally 3.7% over the current price of $60.34 to exceed the average breakeven price of $62.58 by expiration day in May. The investor responsible for the trade could accumulate maximum potential profits of $4.92 per contract if the firm’s shares jump 11.9% to trade above $67.50 before the options expire. PNC’s shares last traded above $67.50 back in May 2010. The financial services provider reports first-quarter earnings before the opening bell on April 21, 2011.

Central European Distribution Corp. (NASDAQ: CEDC)Near-term options activity on the vodka producer this morning suggests some investors expect the pain of CEDC’s post-earnings hangover to stick around through March expiration. Shares in CEDC lost 11.2% today to trade at $12.38, the lowest recorded price for the stock since April 2009. The alcohol beverage provider’s shares dropped 45.8% during the trading week, from a closing price of $22.85 on Monday, to today’s low of $12.38. Put buyers in the March contract, however, do not seem to think CEDC has hit rock bottom just yet. Bearish players picked up more than 2,400 CEDC March 2.5 Puts for an average premium of 59 cents per-contract. Traders long the puts are poised to profit should shares in CEDC fall another 3.8% from today’s low of $12.38 to breach the average breakeven point on the downside at $11.91 by March expiration. Pessimism spread to the lower CEDC March 10 Puts where some 1,600 options were purchased for an average premium of 18 cents apiece. Put buyers at this strike make money in the event that CEDC shares plunge 20.7% to trade below the average breakeven price of $9.82 at expiration day. Options implied volatility (IV) on CEDC shot up 29.7% to 75.55% by 11:20 am in New York.

Staples, Inc. (NASDAQ: SPLS)A number of sizable options trades popped up on the office supplies retailer this week ahead of, and following, the firm’s fourth-quarter earnings report this past Wednesday. Shares in SPLS are currently down 2.95% to arrive at $20.43 just before 11:55 am, but large-volume options trades initiated on the stock this morning appear to be the work of one or more bullish investors positioning for a substantial rally in SPLS through September expiration. A total of 10,000 SPLS September 22 Puts sold for an average premium of 97.5 cents, while 10,000 SPLS Sept 22 Calls were purchased at an average premium of $1.075 apiece. The average net cost of-the bullish plays amount to just 10 cents per-contract. The investors will profit if SPLS shares surge 8.2% over the current price of $20.43 to trade above the average breakeven point to the upside at $22.10 ahead of September expiration.

Gilead Sciences, Inc. (NASDAQ: GILD)Investors piled into April contract call options on the biotechnology firm this morning to position for shares in Gilead Sciences to rise ahead of expiration next month. Shares in GILD are up 2.75% at $41.09 as of 11:25 am. Bulls may be reacting to a number of positive calls on the stock by analysts at various firms this week, as well as to reports that GILD received FDA approval to remove a warning regarding the risk of possible liver injury from the label of its drug, Letairis. Investors expecting shares to climb higher purchased more than 6,370 GILD April 42 Calls for an average premium of 58 cents each. Call buyers are prepared to make money should the price of the underlying stock rally another 3.6% to surpass the average breakeven price of $42.58 by April expiration day. More than 9,985 GILD April 42 Calls changed hands in the first half of the trading session on previously existing open interest of just 359 contracts. Traders are heavily favoring calls over puts today, with more than 10 call options traded on the stock for each single put option in play.

Andrew Wilkinson is senior market analyst with Interactive Brokers, the professional’s gateway to the world’s markets.

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