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Bulls eye Whirlpool call options

Whirlpool Corporation (NYSE:WHR) – Shares in the maker of home appliances rallied as much as 4.6% today to a new 52-week high of $88.79 after U.S. housing starts rose to the highest level since June 2008. The stock has been on a tear since the start of summer, trading up more than 60% since the end of June, and some options traders appear to be positioning for the rally to continue in the near term. Bullish players looked to the Nov. $90 and $92.5 strikes, snapping up roughly 1,000 of the $90 strike call for an average premium of $2.80 each, and purchasing around 375 calls up at the $92.5 strike price for an average premium of $1.95 apiece this morning. Call buyers stand ready to profit at expiration next month should Whirlpool’s shares rally another 4.5% and 6.4% to top average breakeven prices of $92.80 and $94.45, respectively. Traders snapping up WHR calls may also be looking ahead to the company’s third-quarter earnings report, scheduled for release prior to the opening bell next Tuesday.

Whirlpool Corporation (NYSE:WHR)

American International Group, Inc. (NYSE:AIG) – A large put spread initiated on insurer, AIG, this morning may be the work of one strategist locking in gains on the stock on the heels of a more than 35% rally in the price of the shares since June 4th. AIG’s shares are currently up 1.6% on the day to stand at $36.93 as of 1:00 p.m. ET. The single-largest transaction in options on the insurer today, the purchase of a 13,550-lot Jan. 2013 $32/$37 bear put spread at a net premium of $1.46 per contract, profits from- or provides protection against- limited declines in the share price through January expiration. The trade makes money if shares in AIG decline 3.8% from the current level to breach the effective breakeven price of $35.54, with maximum potential gains of $3.54 per contract in the event of a 13.3% pullback to $32.00 by expiration next year. AIG’s shares last traded below $32.00 in August.

Garmin Ltd. (NASDAQ:GRMN) – A large options play established on the provider of GPS-enabled devices and products this morning appears to be a long-term bullish bet that shares in Garmin are headed higher during the next fifteen months. Shares in GRMN are down 0.75% on the session at $39.68, with two weeks remaining to the company’s third-quarter earnings report on October 31st. It looks like one trader sold roughly 3,000 puts at the Jan. 2014 $30 strike in order to partially finance the purchase of around 3,000 calls at the Jan. 2014 $45 strike, all for a net premium outlay of $0.45 per contract. The trade makes money at January 2014 expiration as long as shares in Garmin rally 14.5% to exceed the upper breakeven price of $45.45. The stock traded up to a more than three-year high of $50.67 back in May.

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.

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