CBS Corporation (NYSE:CBS) – Shares in media and entertainment company, CBS Corporation (NYSE:CBS), are advancing today ahead of the company’s first-quarter earnings report after the closing bell. The stock is up 1.2% at $46.31 just after midday in New York, but options activity on CBS Corporation (NYSE:CBS) this morning indicates some traders are bracing for the price of the underlying to pull back. Front month at- and out-of-the-money put options are the most actively traded contracts as measured by volume, with the $44 strike calls seeing the most volume of any single striking price. Less than 10 minutes after U.S. markets opened for trading today, one or more traders started snapping up the May $44 strike puts, buying roughly 2,500 lots at an average premium of $0.55 each. The bearish options make money if shares in CBS Corporation (NYSE:CBS) drop more than 6.0% from the current level to breach the average breakeven point on the downside at $43.45 by May expiration. Options traders appear to be buying the May $45 and $46 strike puts today as well.
Dreamworks Animation Skg Inc (NASDAQ:DWA) – Shares in Dreamworks Animation Skg Inc (NASDAQ:DWA) are up more than 6.0% at $20.46 near midday in New York after the company reported a surprise first-quarter profit and higher-than-expected revenue after the closing bell on Tuesday. According to a press release issued by the Glendale, California-based company this morning, DreamWorks agreed to acquire AwesomenessTV, a teen network on YouTube, for approximately $33 million in cash. Shares in Dreamworks Animation Skg Inc (NASDAQ:DWA) are up more than 25% year to date, and it looks like some options players are positioning for the stock to extend gains in the near term. The Jun $22.5 strike calls attracted the most volume during the first half of the trading session, with upwards of 2,800 lots changing hands versus open interest of 733 contracts. Time and sales data indicates the bulk of the volume was purchased at a premium of $0.25 each. The bullish position starts making money if shares in DWA rally 11% over the current price of $20.46 to surpass the average breakeven point at $22.75 by June expiration. Shares in Dreamworks Animation Skg Inc (NASDAQ:DWA) last traded above $22.75 in November of 2012 when the stock touched a 52-week high of $22.98.
iShares MSCI Emerging Markets Indx (NYSEARCA:EEM) – Options volume on the iShares MSCI Emerging Markets Indx (NYSEARCA:EEM) jumped during the first hour of the trading session on Wednesday after a massive position was initiated in the May expiry put contracts. The iShares MSCI Emerging Markets Indx (NYSEARCA:EEM) snapped a two-day winning streak this morning, with shares down 0.70% at $43.00 as of 11:20 a.m. ET. The largest trade in iShares MSCI Emerging Markets Indx (NYSEARCA:EEM) options today was the purchase of 240,000 puts at the May $42.5 strike at a premium of $0.43 per contract. The bearish position makes money if shares in the iShares MSCI Emerging Markets Indx (NYSEARCA:EEM) decline another 2.2% from the current level to breach the effective breakeven price of $42.07 by May expiration. Shares in the iShares MSCI Emerging Markets Indx (NYSEARCA:EEM) are down roughly 4.0% since the start of 2013.
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.
