Moderately bearish options action crossed the tape in
Spirit AeroSystems Holdings Inc. (NYSE: SPR )
out of the gate on Wednesday thanks to an investor who appears to
have sold a hefty number of calls. Shares of SPR were trading
around $20.63 at the time of the trade. The out-of-the-money (OTM)
SPR September 22.5 calls were active during morning trading likely
due to selling.
At 9:36 a.m. EDT, 4,000 OTM September 22.5 calls crossed the
tape for 35 cents per contract. This price was right at the bid
when the volume hit the tape. Current open interest in this line is
23 contracts. This options action suggests the investor sold to
open this lot of calls and collected 35 cents per contract to do so
(a total of $140,000).
The premium collected also represents the maximum profit on this
short call position. The investor will keep the entire credit if
the stock is still trading lower than the strike price at
expiration. This means the stock has roughly 10% of upside left
before the seller loses money on this trade, which is why this is a
moderately bearish strategy.
Losses on this trade are theoretically unlimited if the stock
soars higher than the breakeven price of $22.85 and continues to
the upside. If the stock is trading higher than this level at
expiration, the investor will lose money in direct relation to any
upside in the stock. It's interesting that at least one investor is
willing to cap gains and potentially suffer unlimited losses to
call for limited upside in SPR during the near term.
Shares of SPR dropped 15 cents, or nearly 1%, during morning
trading. The stock is slightly underperforming the broad-market
weakness out of the gate today. The company did not announce any
news today, but is due to release earnings figures on Aug. 3 before
the market opens. Analysts estimate earnings of 42 cents per