Boyd Gaming Corp. calls draw crowds as shares rally

Boyd Gaming Corporation (NYSE:BYD) – Call options on casino operator, Boyd Gaming Corporation (NYSE:BYD), are changing hands at a clip today, with shares in the name up better than 11% at $6.73 in early-afternoon trading. Overall options volume on Boyd is up sharply, with nearly 15,000 contracts in play as of 12:40 p.m. ET, versus the stock’s average daily volume of around 314 contracts. Most of the trading traffic today has been in Boyd calls today, driving the call-to-put ratio on the name up above 34-to-1. Heavy call buying across expiries suggests some traders are positioning for Boyd’s shares to extend gains during the next few months. The purchase of a block of 2,955 in-the-money Dec. 21 ’12 $6.0 strike calls purchased this morning at a premium of $0.40 apiece is amassing substantial paper profits for the buyer just a couple of hours after purchase. The $6.0 strike calls, which expire at the end of this week, currently tout a price tag that has doubled intraday to $0.80 per contract as of 12:45 p.m. ET in New York. Bullish traders also stepped in to buy more than 1,700 calls at the Dec. 21 ’12 $7.0 strike for an average premium of $0.08 apiece during the session. These contracts make money as long as shares in Boyd Gaming Corp. top $7.08 at expiration. Like-minded strategists purchased upside call options expiring in January 2013 and March 2013, as well. The most active contracts are the Jan. 2013 $7.0 strike calls, seeing volume in excess of 10,000 contracts versus open interest of 1,079 positions during the first half of the trading day. Time and sales data suggests most of the $7.0 strike calls expiring next month were purchased for an average premium of $0.22 apiece today. Traders long the $7.0 strike calls stand ready to profit should Boyd Gaming Corporation (NYSE:BYD)’s shares tack on another 7% to top the average breakeven price of $7.22 by expiration next year.

United Parcel Service, Inc. (NYSE:UPS) – Stocks are rallying this morning amid signs of progress in negotiations between the White House and Republicans regarding the fiscal cliff. Shares in delivery services company, United Parcel Service, Inc. (NYSE:UPS), joined in on the broad-market move, rising 1.7% to stand at $74.58 as of 11:45 a.m. ET. United Parcel Service, Inc. (NYSE:UPS) is currently tackling its busiest week of the year ahead of the holidays, with the company planning to deliver 135 million packages around the world. The stock has increased 6% during the past four weeks, but trading traffic in Dec. 21 ’12 put options this morning suggests some traders are bracing for shares in the Atlanta, Georgia-based company to potentially surrender recent gains this week. Nearly 7,000 puts changed hands at the Dec. 21 ’12 $72.5 strike by midday on the East Coast, and it looks like most of the volume was purchased for an average premium of $0.30 apiece. Put buyers stand ready to profit should shares in United Parcel Service, Inc. (NYSE:UPS) slip 3.2% from the current price of $74.58 to breach the average breakeven point on the downside at $72.20 by expiration.

Chipotle Mexican Grill, Inc. (NYSE:CMG) – A bull call spread initiated on Chipotle this morning looks for shares in the restaurant operator to move higher by the end of the week. Shares in the burrito maker are currently up 2.5% at $293.79 just after midday in New York trading. The stock, which had dropped nearly 50% from an all-time high of $442.40 in April, down to as low as $233.82 in October, has since gained 25% in the past two months to reach the current level. One options player looking for shares in Chipotle Mexican Grill, Inc. (NYSE:CMG) to continue to rebound this week appears to have purchased an 825-lot Dec. 21 ’12 $300/$305 bull call spread for a net premium outlay of $0.95 per contract. The spread positions the trader to make money in the event Chipotle’s shares rally another 2.4% to surpass the effective breakeven price of $300.95, with maximum potential profits of $4.05 per contract available should the stock rise 3.8% to settle above $305.00 at expiration this week. Chipotle Mexican Grill, Inc. (NYSE:CMG) shares last traded above $305.00 in the first week of October.

Caitlin Duffy

Equity Options Analyst

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