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Bullish Player Acts on Gymboree Corp. Speculation with Ratio Call Spread

  Today’s tickers: GYMB, EQIX, JPM, SLV, STI, MBI, EEM, SNP & GDX GYMB  - Gymboree Corp. –  One options player populating the retailer of children’s clothing and accessories waited until the twilight of the final trading day of the week to initiate a bullish stance on the stock. Gymboree’s shares surged as much as 21.425% at the start of the session to touch an intraday high of $50.44 on speculation the firm may put itself up for sale. The rumors drove implied volatility on Gymboree up 20.10% to 48.52% this morning along with the price of the underlying shares and spurred demand for options. Shares as well as volatility cooled somewhat by late afternoon, with shares up 16.5% at $48.40 and volatility higher by 13.5% to 45.85%, as of 3:00 pm ET. The patient bullish player looked to the February 2011 contract to establish a ratio call spread, purchasing 1,050 calls at the Feb. 2011 $48 strike at a premium of $4.80 each, and selling 2,100 calls at the higher Feb. 2011 $55 strike for a premium of $1.85 a-pop. Net premium paid to initiate the spread reduces down to $1.10 per contract. Thus, the trader is poised to profit should GYMB’s shares rally 1.45% over the current price of $48.40 to surpass the effective breakeven price of $49.10 by February expiration day. Maximum potential profits of $5.90 per contract are available to the ratio-spreader if the retailer’s shares surge 13.6% to settle at $55.00 at expiration. The greater proportion of sold calls expose the trader to losses should Gymboree’s shares explode higher to exceed the effective upper breakeven price of $60.90 ahead of expiration day in February. Analysts at Susquehanna raised their share price target on the stock to $60.00 from $48.00 after the Wall Street Journal’s website said bankers were looking into the possibility that Gymboree could be sold to private equity. EQIX  - Equinix, Inc. –  The provider of global data center services appeared on our ‘hot by options volume’ market scanner in afternoon trading after one options investor initiated a bearish put spread on the stock in the December contract. EQIX shares are currently up 0.60% to stand at $102.95 as of 3:15 pm ET. The put spreader may be building up the pessimistic play as a hedge against the firm’s third-quarter earnings report scheduled for October 21 after the close. The trader purchased 4,168 puts at the December $100 strike for…
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