Wednesday Options Brief: FITB, BRK.B, PPL & GCI

Andrew Wilkinson submits: Fifth Third Bancorp. (FITB) – One bearish options investor purchased a large put spread on Fifth Third Bancorp this morning in order to prepare for potential erosion in the price of the underlying stock through July expiration. FITB’s shares rallied slightly earlier in the session, but are currently flat on the day at $13.51 just before 12:00 pm (ET). The put strategist appears to have purchased 11,750 puts at the July $13 strike for an average premium of $0.37 apiece, spread against the sale of 11,750 puts at the lower July $12 strike for a premium of $0.13 each. The average net cost of establishing the bearish spread amounts to $0.24 per contract, thus positioning the responsible party to profit should FITB’s shares slip beneath the average breakeven point to the downside at $12.76 by expiration day. Maximum potential profits of $0.76 per contract pad the investor’s wallet if Fifth Third’s shares fall 11.2% from the current price of $13.51 to trade at or below $12.00 by expiration day next month. Berkshire Hathaway Inc. (BRK.B) – Shares of the holding company, which owns subsidiaries engaged in diverse business activities such as property and casualty insurance and reinsurance, slipped slightly lower by 0.30% to stand at $79.29 just before 11:30 am (ET). Bearish options activity on the stock today suggests at least one investor is bracing for continued erosion in the price of the underlying shares through August expiration. The put player appears to have purchased approximately 1,300 puts at the August $75 strike for an average premium of $2.14 apiece, spread against the sale of 2,600 puts at the lower August $70 strike for an average premium of $1.03 each. The average net cost of the ratio spread amounts to just $0.08 per contract. The transaction prepares the responsible party to make money should Berkshire’s shares decline 5.5% from the current price to breach the effective breakeven point to the downside at $74.92 ahead of expiration day in August. Maximum potential profits of $4.92 per contract are available to the put spreader if shares of the underlying stock plummet 11.7% to settle at $70.00 at expiration. Complete Story »