Bearish Bets On Safeway Inc. (SWY) Pay Off As Stock Tumbles After Earnings

Safeway Inc. (NYSE:SWY) – Shares in the food and drug retailer are trading down sharply on Thursday, falling more than 18% to $23.14 during the first half of the session, after the company posted first-quarter revenue that missed analyst estimates. At least one trader who appears to have purchased front month put options on Safeway on Wednesday afternoon is benefitting from the double-digit percentage declines in the price of the underlying today. The largest increase in put open interest on Safeway Inc. (NYSE:SWY) yesterday was the 4,566-lot jump in the number of open contracts at the May $26 strike. It looks like most of the $26 puts were purchased at a premium of $0.40 each. Traders long the contracts are benefitting from Safeway’s pain today, with premium on the $26 puts up more than six-fold at $2.55 apiece as of 11:55 a.m. in New York. Today, some options players appear to be nibbling at Safeway calls to position for the shares in Safeway Inc. (NYSE:SWY) to rebound somewhat in the near term. Traders picked up around 1,400 calls at the May $24 strike for an average premium of $0.94 apiece and may profit at expiration in the event that shares rally 7.8% over the current price of $23.14 to top the average breakeven point at $24.94.

Safeway Inc. (NYSE:SWY)

The Cheesecake Factory Incorporated (NASDAQ:CAKE) – Options traders who initiated bullish bets on The Cheesecake Factory Incorporated (NASDAQ:CAKE) yesterday ahead of the restaurant operator’s first-quarter earnings release are enjoying sizable gains in the value of their positions today, with shares in the name up nearly 9.0% in the early going to touch an all-time high of $41.02. Trading traffic in the May $38 and $39 strike calls picked up speed yesterday just before 12:15 p.m. ET. It looks like one or more traders snapped up around 320 of the $38 strike calls at an average premium of $1.13 apiece, and roughly 400 of the $39 strike calls for an average premium of $0.77 each. The value of these contracts are up sharply, with premium on the $38 and $39 calls hovering around $2.60 and $1.75 each, respectively, as of the time of this writing. It looks like some traders are stepping in to position for The Cheesecake Factory Incorporated (NASDAQ:CAKE)’s shares to extend gains in the near term, with around 300 of the May $40 strike calls and some 230 of the May $41 strike calls purchased in the early going at average premiums of $1.05 and $0.62 apiece, respectively.