IB Options Brief: CBS Corp. (CBS) & EXCO Resources, Inc. (XCO)

Posted April 19th, 2012 by Caitlin Duffy in Unusual Activity

CBS ñ CBS Corp.
A burst of call buying on CBS Corp. caught our eye today, with shares in the name trading up 1.2% at $33.31 in early-afternoon trade. The bulk of the options volume in the mass media company appears to be betting on continued near-term appreciation in the price of the underlying shares, perhaps ahead of the Companyís first quarter earnings release after the final bell on May 1st.

The most active contracts in play on CBS Corp. today are the May $34 strike calls, where upwards of 4,400 lots changed hands against open interest of 929 positions. It looks like nearly all of the call options were purchased in the first 20 minutes of the trading day at a premium of $0.70 apiece. The bullish calls may be a profitable investment at expiration next month should shares in CBS Corp. rally another 4.2% to top the breakeven price ñ and new multi-year high ñ of $34.70. Shares in CBS are up nearly 20.0% year-to-date.

XCO ñ EXCO Resources, Inc.
Shares in the Dallas, Texas-based energy company are on the rise today, up 5.7% at $6.10 as of 12:15 p.m. in New York. The stock popped up on our ëhot by options volumeí market scanner after large blocks of call options changed hands in the May expiry. Strong intraday gains in the shares have lifted the value of the bullish options substantially during the past few hours.

Most of the options activity on XCO is centered in the May $6.0 call, where more than 14,000 contracts traded against open interest of 1,423 positions. It looks like the majority of the calls were purchased just after 10:00 a.m. this morning in two blocks, one 5,450-lot block, and the other 3,942 lots, both priced at $0.45 per contract. The calls are now in-the-money, but did not start the day there, with XCO shares hovering around $5.85 during the first 40 minutes of the session.

The May $6.0 strike calls are now roughly 33.0% more expensive than they were earlier today and currently display an asking price of $0.60 each. The trader or traders responsible for purchasing the large blocks of calls stand ready to profit by expiration should shares in XCO rally another 5.7% to surpass the effective breakeven price of $6.45. EXCO Resources is scheduled to report first-quarter earnings after the close of trading on May 1st.

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