(By Andrew Wilkinson) Tiffany & Co., Inc. (TIF) – A
surprise earnings miss and a reduced full-year profit and sales forecast
from luxury jewelry retailer, Tiffany & Co., took some of the
luster out of its shares today, with the stock trading down 8.5% at
$56.55 as of 11:50 a.m. in New York. Options activity on Tiffany this
morning suggests mixed sentiment on the stock going forward, with some
strategists bracing for further declines in the price of the underlying,
while others position for a rebound. Fresh interest building in the
July $57.5 strike put, where more than 800 in-the-money contracts
changed hands against open interest of 114 positions, appears mostly to
be the work of buyers. Traders paid an average premium of $3.74 apiece
for the put options and may profit at expiration in the event that
Tiffany's shares decline another 4.9% to settle beneath the effective
breakeven price of $53.76. Meanwhile, a call spread in the August expiry
looks for shares in the jeweler to post solid gains during the next few
months. A 242-lot Aug. $57.5/$65 call spread purchased for an average
premium of $2.50 per contract may result in maximum potential profits of
$5.00 per contract should TIF's shares soar 14.9% to top $65.00 by
August expiration.
Pandora Media, Inc. (P) – Shares in
Pandora are moving sharply to the upside this morning after the
provider of Internet radio reported better-than-expected first-quarter
earnings after the close of trading on Wednesday and an increase in
target share price to $16.00 from $14.00 at JMP Securities. The stock
rallied as much as 19.0% to $12.285 today, reaching their highest level
since March, but trading in the January 2013 expiry puts suggests some
strategists are securing disaster insurance on the stock. It looks like
traders picked up 200 puts at the Jan. 2013 $4.0 strike for a premium of
$0.25 apiece, perhaps under the expectation there could be catastrophic
declines in the share price in the next seven months or, alternatively,
to hedge a position in the underlying shares against a low-probability
event. The stock would need to lose nearly 70.0% of its value in order
for the contracts to land in-the-money at expiration next year.
New York Times Co. (NYT) – Call
options on the media company are active today, with shares in New York
Times Co. trading higher by 1.1% on the day at $6.38 just before 12:50
p.m. ET. Traders positioning for shares in NYT to extend gains focused
in on the July $7.0 strike call, where more than 700 contracts changed
hands against open interest of 555 contracts. Traders paid around $0.26
in premium per contract to buy roughly 530 contracts, adding to bullish
positions established earlier this month at an average premium of $0.15
each. Call buyers paying an average of $0.26 per contract today may
profit at expiration in July if shares in NYT rally another 13.8% to
settle above $7.26. Shares in New York Times Co. last traded above $7.26
back in February. The company reports second-quarter earnings on July
19th, a few days prior to July options expiration.