*Scanning all single-stocks subject to 2500 contracts minimum call or put volume

JP Morgan (JPM) edged up 12 cents to $39.06 and the top options trade in the name today is a block of 8,874 Jul 43 calls at 89 cents per contract. It printed early on the ISE and is an opening customer buyer, according to ISEE data. 12,400 now traded vs. 1,487 in open interest. 71K calls and 78K puts traded total. Implied volatility in JPM is down 8.5 percent to 42, significantly below the multi-month highs of 56 seen a week ago.

Rambus put volume surpassed 6 times normal by midday with a buyer paying $1.37 for 9400 downside June 21 puts vs shares at $25.15, and additional buying seen in the Jun 23 puts as implied vols at both strikes lift nearly 7 points in front of a court decision noted in Barrons. Calls are also unusually active at 3x adv, with nearly 2000 June 25 calls trading, and bid-side volume in the upside June 28 and 30 calls.

*Scanning all single-stocks subject to 2500 contracts minimum call or put volume

Amgen shares are off 22c to $52.33 notable trade in the June $52.50 calls as a 4688 block trade (now total of 5,056) early at the $1.50 ask in what looks to be opening purchase.

US Airways (LCC) hit a new 52-week high and is up 85 cents to $8.66 after JP Morgan upgraded the stock to Overweight from Neutral. About 13K calls already traded on the airliner. The top trade is 2000 Jul 9 calls at 77 cents, which looks like an opening buyer. June 8, 9 and 10 calls are seeing interest as well. Implied volatility is down 6.5 percent to 74.

BofA (BAC) is a Dow component leader early Wednesday, up 57 cents or 3.6 percent, to $16.07. A noteworthy trade surfaced in the bank late Tuesday when a strategist bought 60,000 Jun 16 calls at 49 cents while selling 70,000 Jun 17 calls at 17 cents. Open interest data indicate new positions were opened and this strategist might expect BAC to recover in the weeks ahead, but not make a significant move beyond $17. Shares are down 17.5 percent since April 15.

Pfizer (PFE) was down 22 cents to $15 midday Tuesday and the top trade in the name was a block of 6750 Dec 15 calls on the $1.39 bid. Looks tied to 675K shares at $14.99 and part of a buy-write. Remember that a buy-write is the same as a “covered call” and one of the first strategies many options traders learn. In this trade, the investor simply buys shares and sells calls — selling 1 call for every 100 shares.

Using the Pfizer example, assuming shares are trading for $15 and the investor sells December 15 (at-the-money) calls at $1.40, the cost basis of owning shares is $13.60 (or $15 minus the $1.40 premium received for selling calls). If shares fall below $13.60 by the December expiration, the investor will suffer a loss. If shares trade at $15.00 or more at expiration, the calls will be assigned and shares called away at $15, for $1.40 profit per share. Therefore, the maximum profit is at $15 and equals $1.40, or 10.3 percent

Finally, if shares trade between $13.60 and $14.99, the calls probably won’t be assigned. The profit equals the stock price minus the $13.60 breakeven. At expiration, the calls will expire worthless and the strategist can 1) hold the stock, 2) sell more calls, or 3) exit the position. Importantly, like with any options strategy, the covered call can be closed out through an offsetting transaction at any time prior to expiration.

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