By Jud Pyle, CFA, chief investment strategist for the Options News Network
Could shares of
United Parcel Service
be hard-pressed to rally any higher during the near term? Trading action during the first 30 minutes of Monday's session suggests at least one investor thinks so.
UPS did not announce any news today, but the stock is currently edging up toward its 52-week high of nearly $65. With shares up around 5 cents to $64.20 (just 1% lower than the 52-week high reached on March 30) so far today, the bear case stands that the stock could hit a ceiling during the short term.
UPS has not announced an earnings release date, but the market anticipates the report sometime around April 27. Front-month call action out of the gate suggest investors could be calling for limited upside in the stock prior to the company's earnings announcement.
Around 9:50 a.m. EST, a large block of April 65 calls changed hands for 46 cents per contract, which was 1cent lower than the bid price at the time of the trade. These near-the-money calls are home to current open interest of 26,000 contracts, indicating investors could have sold these options to close on a bet that the stock won't rally much higher during the next 11 days.
Investors who closed long call positions collected 46 cents per contract on this trade and took profits instead of holding the options until expiry. These options have dropped 1 cent on the day, while implied volatility currently stands at 17% compared to the stock's 30-day historical volatility of 13%.
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."