Traders Toying With Hasbro Options

With earnings in the offing, the action picks up.
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Options trading today is taking on the look of a toy story, pushed primarily by plays ahead of

Hasbro

(HAS) - Get Report

earnings.

With Hasbro set to report earnings, the front-month call options attracted investors like flies to honey.

Hasbro options have spiked up like a

Light Saber, with the July 25 calls up 7/16 ($43.75) to 1 1/16 ($106.25) and the July 26 5/8 calls up 3/16 ($18.75) to 7/16 ($43.75), as the underlying stock price strengthened 7/8 to 25 1/8.

Options pros, though, warn that this Hasbro action represents a once-in-a-blue-moon play, given that the stock could either ignite or sell off right after the Pawtucket, R.I., company reports an expected strong quarter on July 15. The options expire July 16.

"Every one of your neighbors with kids looks at Hasbro and

Mattel

(MAT) - Get Report

and thinks they have the key to the trend in the sector, but these are retail people," says Paul Foster with

1010Wallstreet.com

in Chicago.

Hasbro, the No. 2 U.S. toymaker, is expected to report earnings of 10 cents a share on July 15, compared with 3 cents in the same period a year earlier. That even accounts for a recall of more than 650,000

Star Wars

toy Light Sabers because of overheated batteries.

Earnings dominated an otherwise themeless options trading session, with some traders pointing to a potential short squeeze in

Apple

(AAPL) - Get Report

on the company's earnings due out this week ahead of Friday's expiration.

Apple's stock has been on a tear lately, and "it's possible that the specialist in the option has been selling calls at every strike price," said one Philadelphia-based options trader. "If they're hedged they're OK, and if not...." Apple stock was down 1 1/16 to 53 7/16.

Apple is set to report earnings Wednesday.

Elsewhere in the technology sector,

Maxtor

(MXTR)

attracted heavy options trading early in the session in what appeared to be one investor "rolling" out of July contracts and into August and October contracts.

Roughly 9,200 contracts in the July 5 calls traded down 1/8 ($12.50) to 1/2 ($50).

The August 5 and 7 1/2 calls, meanwhile, gained 1/8 ($12.50) to 1 ($100) and 1/16 ($6.25) to 3/8 ($37.50) respectively. On the Philadelphia Stock Exchange, a huge slug of 5,000 October 5 calls crossed at 11:09 a.m., trading up 5/16 ($31.25) to 1 9/16 ($156.25). Open interest totaled 4,260. Disk-drive maker Maxtor's stock was flat at 5 1/2.

Meanwhile, let's take a quick flashback to

Kansas City Southern

(KSU) - Get Report

.

The company's options showed little life today on the morning after the company said it would spin off its holdings in

Janus

mutual funds and other financial services. KSU's spinoff chatter appeared

here when rumblings first began in the options market but on news that the spinoff is actually in the works, trading was unusually light.

The spinoff of all of Kansas City's financial companies received a favorable tax ruling from the

Internal Revenue Service

, paving the way for the anticipated transaction to take place by the end of this year, said Kansas City Southern in a statement Monday.

But senior executives at Janus are interested in having the Denver fund company spun off on its own, without the three smaller companies, according to an interview in

The Wall Street Journal

with Landon Rowland, Kansas City Southern's chairman and chief executive.

Kansas City Southern's stock was trading down 5/8 to 63 3/8 at midday.

As originally published, this story contained an error. Please see

Corrections and Clarifications.