Express, Inc. (NYSE:EXPR) – Options in play on Express this morning suggests shares in the apparel retailer, hard hit in recent months and sitting at all-time lows, may stage a significant turn-around in the next six months. Express shares, down nearly 60% from a March 2012 peak of $26.27, fell 2.35% in the first half of the trading session to $11.23 by 11:35 a.m. in New York. Upside call buying at the April 2013 $15 strike, where some 2,300 contracts were picked up for an average premium of $0.73 apiece, suggests at least one trader is positioning for EXPR shares to potentially increase sharply by expiration next year. The calls may be profitable at April expiration in the event that Express, Inc. shares jump 40% to exceed the average breakeven price of $15.73. The specialty retailer reports third-quarter earnings ahead of the opening bell on November 28th.
Financial Select Sector SPDR (NYSEARCA:XLF) – A large bearish spread established on the XLF on Tuesday prepares one large options market participant for a near 20% pullback in the price of the underlying fund during the next three months. Shares in the ETF are roughly flat on the day, down 0.05% at $15.95 as of 11:50 a.m. ET. The strategist on Tuesday afternoon purchased an 80,000-lot Jan. 2013 $13/$15 put spread at a net premium outlay of $0.27 per contract. Profits accrue on the downside in the event that shares in the XLF decline 8% to breach the effective breakeven price of $14.73, with maximum possible gains of $1.73 per contract available on the spread given an 18.5% decline to $13.00 by January expiration. Companies that make up the top 10 holdings in the fund, including Wells Fargo & Co., Berkshire Hathaway Inc. and JPMorgan Chase & Co., are all scheduled to report third-quarter earnings within the next three weeks.
Caitlin Duffy
Equity Options Analyst
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