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Options Radar: GameStop, Chipotle Mexican Grill, and JPMorgan Chase

Reviewing notable options activity on GameStop Corp., Chipotle Mexican Grill, Inc., and JPMorgan Chase & Co.

by 8/21/2014 12:56 PM
Stocks quoted in this article:

Three names seeing notable option activity today are video game retailer GameStop Corp. (NYSE:GME), fast-casual restaurateur Chipotle Mexican Grill, Inc. (NYSE:CMG), and financial firm JPMorgan Chase & Co. (NYSE:JPM). Here's a look at how today's option traders have been placing their bets on GME, CMG, and JPM.

  • GameStop Corp. (NYSE:GME) is down 2.2% at $40.43 ahead of tonight's second-quarter earnings release. The stock's short-term options are in demand, as GME's 30-day at-the-money (ATM) implied volatility (IV) has popped 2.7% to 47.1%. While calls are trading at twice the normal intraday pace, puts are still the options of choice. Specifically, it seems bears are buying to open the weekly 8/22 40-strike put to gamble on a post-earnings retreat for GME tomorrow. One of the most active calls, meanwhile, is the weekly 8/22 42 strike, which is being bought to open to either bet on or hedge against a surge north of $42 by tomorrow's close, when the weekly options expire. Short interest accounts for 27.5% of GME's total available float, and GameStop has averaged a one-day post-earnings gain of 1.7% over the past seven quarters, making protective calls a distinct possibility.

  • Chipotle Mexican Grill, Inc. (NYSE:CMG) touched an all-time high of $697.93 earlier in the session, but has since cooled its jets to flirt with a 0.8% gain at $683.70. The stock's 30-day ATM IV has jumped 4.7% to 18.8%, and intraday call volume is running at twice the typical rate. CMG's quest for new highs has traders eyeing the round-number $700 level, with buy- and sell-to-open activity detected at the weekly 8/22 700-strike call -- the most popular option thus far. While the buyers expect CMG to topple the strike by tomorrow's close, sellers are betting on the shares to remain south of $700 through the end of the week.

  • JPMorgan Chase & Co. (NYSE:JPM) is up 1.2% at $58.30, following sector peer Bank of America Corp (NYSE:BAC) into the black. Intraday call volume is running at three times the average rate, and has eclipsed put volume by a margin of more than 3-to-1. It looks like one trader is expecting JPM to muscle into annual-high territory within the next few months, buying to open more than 11,500 January 2015 60-strike calls at $1.40 apiece. To profit on the play, the buyer needs the stock to be perched atop $61.40 (strike plus premium paid) -- just a chip-shot from JPM's current annual high of $61.48 -- when January options expire. Reward will increase with each step north of breakeven, while risk is capped at the initial net debit.

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