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Option Clips: LinkedIn, Rite Aid, and International Paper

Reviewing notable options activity on LinkedIn Corp, Rite Aid Corporation, and International Paper Company

by 4/8/2014 1:11 PM
Stocks quoted in this article:

Two equities generating buzz on StockTwits today are professional networking site LinkedIn Corp (NYSE:LNKD) and pharmacy firm Rite Aid Corporation (NYSE:RAD). Paper and packaging concern International Paper Company (NYSE:IP), meanwhile, is also attracting attention in the options pits. Here's a look at how traders have been aligning their speculative bets today.

  • After falling to a new annual low of $158.06 yesterday, LinkedIn Corp (NYSE:LNKD) is on the mend, up 5% at $167.65, as traders hunt for tech-sector bargains. In fact, the security's 14-day Relative Strength Index (RSI) sits at 29 -- in oversold territory. The stock's short-term options are in demand, as its 30-day at-the-money implied volatility is 2.2% higher at 58.8%. While both calls and puts are trading at accelerated levels, relative to the equity's average intraday pace, the two most active options are puts expiring at the close on Friday. Digging deeper, it appears speculators are selling to open the weekly 4/11 155- and 160-strike puts, amid expectations for LNKD shares to remain atop the respective strikes through the week's end.

  • Rite Aid Corporation (NYSE:RAD) is 0.7% higher at $6.09, bringing its year-to-date gain to more than 20%. The company is slated to report fiscal fourth-quarter earnings before the open on Thursday, and has matched or exceeded the Street's per-share profit projections in seven of the past eight quarters. In fact, RAD averages a one-week post-earnings gain of 8.7%. Nevertheless, it appears one options speculator may be rolling the dice on limited momentum for RAD after earnings, selling to open 10,000 puts and 10,000 calls at the July 6 strike. By implementing a short straddle for $1.20 per pair of contracts, the speculator stands to profit as long as RAD remains between $4.80 (strike minus net credit) and $7.20 (strike plus net credit) through July options expiration. RAD hasn't traded south of the lower breakeven level in 2014, and hasn't perforated the upper breakeven level since October 2001.

  • Finally, International Paper Company (NYSE:IP) is 0.4% lower at $45.41, bringing its year-to-date deficit to 7.3%. Intraday call volume is running at 17 times the norm, with 31,000 contracts exchanged. Almost all of the action transpired at the January 2015 60-strike call, where a sweep of 30,000 contracts traded near the ask price. In light of IP's technical headwinds of late, Trade-Alert theorizes it could be one investor buying to close half his January 2015 50/60 call spread -- initiated back in November -- though by leaving the purchased 50-strike calls open, he expects IP to climb north of the mid-century mark before the LEAPS expire. IP hasn't traded atop $50 since late July.

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