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Garmin options signal shares due North; Buyers of Primero, GM calls see gains

Garmin Ltd. (NASDAQ:GRMN) – Options activity on the maker of GPS-enabled products and navigation devices suggests one or more traders are positioning for shares in Garmin to increase in the near term. Upside call buying initiated in early trading on Friday morning may be a profitable strategy should shares in the name rise ahead of the company’s third-quarter earnings report on October 31st. Shares in GRMN are up 0.90% at midday in New York to stand at $42.95. Volume in front-month calls is heaviest at the Oct. $44 strike, where more than 1,000 contracts changed hands against open interest of 252 positions. It looks like most of the call options were purchased this morning for an average premium of $0.47 apiece, thus preparing buyers to profit in the event of an additional 3.5% move higher in the price of the underlying to $44.47 by expiration in two weeks time. Overall, options on Garmin are more active than usual. Volume has just ticked above 4,500 contracts as of 12:10 p.m. ET, roughly four times the stock’s average daily options volume of 1,118 contracts.

Garmin Ltd. (NASDAQ:GRMN)

Primero Mining Corp (NYSE:PPP) – Shares in precious metals producer, Primero Mining Company, jumped nearly 50% to a fresh multi-year high of $7.92 this morning on news of a favorable tax ruling from Mexican authorities. The sharp move in the price of the underlying shares sparked heavier than usual activity in Primero Mining options this morning, with overall volume approaching 1,500 contracts as of 12:15 p.m. in New York, versus average daily options volume of 124 contracts on the stock. Traders positioning for shares to extend gains picked up more than 100 calls at the Oct. $7.5 strike for a premium of $0.20 apiece. Call buyers profit at expiration in two weeks as long as shares in PPP settle above $7.70. Bullish traders also purchased around 90 of the Nov. $7.5 strike calls for an average premium of $0.57 apiece, and snapped up around 120 of the Jan. 2013 $7.5 strike calls at an average premium of $0.88 per contract this morning. Options traders long upside calls on Primero ahead of the favorable tax ruling and subsequent move in the share price saw the value of their positions rise markedly today. One strategist appears to have purchased 100 Oct. $5.0 strike calls at a premium of $0.45 apiece back on September 20th; premium on the contracts has since jumped 380% given a last-traded price on the calls of $2.15 as of 12:30 p.m. ET.

General Motors Company (NYSE:GM) – Options traders who placed bullish bets on General Motors on Monday are enjoying substantial paper profits on those positions on Friday, with shares in the automaker up sharply since the start of the trading week. The stock currently stands off the highs of the session, up 1.6% on the day at $25.05 as of 12:50 p.m. ET. Rising call open interest at the Oct. $24 and $25 strikes following Monday’s trading session was largely, by the looks of time and sales data, spurred by strategists getting long the contracts. It appears some 8,500 of the Oct. $25 strike calls were purchased Monday for an average premium of $0.13 apiece. These contracts, earlier changing hands in a large block at a $0.77 bid price as part of a sizable spread, are currently trading at $0.55 each as of 1:15 p.m. ET. Buyers of the Oct. $24 strike call on Monday paid an average premium of $0.30 per contract for approximately 3,500 lots; premium on the calls has since increased four-fold given the last traded price of $1.22 on the options. General Motors reports third-quarter earnings on October 31st prior to the opening bell.

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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