Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Analyst upgrade spurs action in Skechers options, lifts shares

Skechers USA Inc (NYSE:SKX) – An upgrade to ‘Positive’ from ‘Neutral’ with a 12-month target price increase to $22.00 from $19.00 at Susquehanna today kicked shares in shoemaker, Skechers USA Inc (NYSE:SKX), up as much as 13.6% to $19.26 on Wednesday. The sharp rise in shares sparked heavier-than-usual trading traffic in Skechers options this morning, with notable volumes building in upside calls on the footwear company. It looks like some traders are positioning for shares in the name to extend gains, while other strategists are taking profits on previously established bullish positions. The Dec. $17 strike call changed hands 1,000 times against open interest of 1,445 contracts within minutes of the opening bell today. Much of the open interest in the $17 strike call is the result of trading that took place on Monday; 1,000 of these contracts were purchased on Monday afternoon at a premium of $0.74 apiece. Today, it looks like the buyer of those 1,000 option contracts is selling-to-close the position for an average premium of $1.90 each, and pocketing net profits of around $1.16 per contract in the process. Fresh in-the-money call buying on Skechers USA Inc (NYSE:SKX) is apparent at the Dec. $18 strike where 300 lots were purchased at an average premium of $1.07 each. Buyers of these contracts profit at expiration next month as long as shares in Skechers settle above the average breakeven price of $19.07. Bullish positioning spread to the Jan. $18 and $20 strike calls, as well. Traders snapped up roughly 200 lots at each striking price, paying average premiums of $1.72 and $0.68 per contract, respectively. Upwards of 3,300 call and put options are in play on the Manhattan Beach, Calif.-based company as of 11:50 a.m. ET, versus the stock’s average daily options volume of around 430 contracts. Calls are far more active than puts, with the call-to-put ratio up above 11.6 as of the time of this writing.

Skechers USA Inc (NYSE:SKX)

Flowers Foods, Inc. (NYSE:FLO) – Traders are continuing to flock to Flowers Foods, Inc. (NYSE:FLO) options on reports Hostess Brands, Inc. will ask a court judge for permission to shut down its operations indefinitely following a failed attempt to mediate a contract dispute between the company and its bakers’ union. Shares in Flowers Foods on Monday jumped to a four-month high of $24.04 on speculation the company could be a buyer in the event Hostess puts its assets up for sale. Talk of mediation shaved a portion of the roughly 30% rally in the shares since last Monday off this week, but developments in the situation today now find the stock moving higher once more, up 4.4% on Wednesday afternoon at $23.08 as of 12:30 p.m. ET. Options traders positioning for the price of the underlying to extend gains purchased front month calls on the Flowers this morning. The most active contracts are the Dec. $25 strike calls, which changed hands more than 3,000 times versus open interest of 289 contracts. The bulk of the volume was purchased in a block of 2,500 call options at a premium of $0.25 apiece. The trader or traders long the $25 strike calls stand ready to profit at expiration should shares in Flowers Foods rally another 9% over the current price of $23.08 to surpass the average breakeven price at $25.25.

St. Jude Medical, Inc. (NYSE:STJ) – Shares in the medical devices maker are reeling after an inspection report from the FDA pointed to errors in the company’s oversight and testing procedures related to design changes of one of St. Jude Medical’s key products. The stock has dropped 15% as of midday in New York to a multi-year low of $30.35. Traders quick out of the gate to scoop up bearish put options on the name are seeing the value of their positions rally intraday. It looks like bears picked up roughly 1,300 puts at the Dec. $32 strike for a premium of $0.65 apiece this morning when shares had yet to slip to current session lows. Premium required to purchase these now deep in-the-money Dec. $32 strike puts has jumped three-fold since this morning to $2.10 apiece just a few short hours later. Similarly, one or more strategists picked up 300 puts at the Dec. $33 strike for an average premium of $0.95 each in morning trading. The deep in-the-money Dec. $33 strike puts now tout an asking price that has tripled to $2.85 each as of 12:10 p.m. ET. Overall options volume on the medical devices maker in excess of 25,000 contracts is substantial in comparison to the stock’s average daily options volume of 1,761 contracts and overall open interest of 35,099 previously established positions.

Caitlin Duffy

Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!