Covered-Call Sellers Make Note of Exits on American Airlines Parent Corp.

Today’s tickers: AMR, AIG, C, GME, HD, XLP, ALL, CMC, QLGC & YUM AMR - AMR Corp. – Bullish investors engaged in covered-call selling on AMR Corporation this afternoon after its subsidiary, American Airlines, revealed February passenger unit revenue increased between 6.5% to 7.5% as compared to roughly the same time a year ago. The so-called buy-write strategy took off amid an 11% rally in the price of the underlying stock to $9.93. Options traders sold approximately 16,300 calls at the March $11 strike for an average premium of $0.09 apiece, and simultaneously purchased an equivalent number of AMR-shares when the stock was trading at approximately $9.84 each. The net price paid per AMR-share amounts to $9.75 apiece because of the $0.09 per contract financing provided by the sale of the call options. Investors utilizing the buy-write strategy are positioned to accumulate maximum potential gains of 12.82% if shares rally through $11.00 by expiration day. The covered-calls provide an effective exit strategy for investors, who walk away with 12.82% profits if AMR shares rally to $11.00, and if the underlying shares are called from them at expiration. AIG - American International Group, Inc. – Insurance firm, American International Group, already reported plans to sell two units for $51 billion, but speculation that it may sell additional assets sparked rampant options trading activity on the stock this afternoon. Shares surged more than 18% to $34.34 at times during afternoon trading. Options investors exchanged more than 224,000 contacts on AIG as of 2:30 pm (ET), and traded more than two call options on the stock for each single put option in play. Two-way trading traffic in out-of-the-money call options is evident, but it looks like – in most cases – more calls are being purchased than sold. The nearest-to-the-money March $35 strike had more than 37,000 calls trade today versus that strike’s previous existing open interest of just 12,297 contracts. More than 12,300 calls were purchased for an average premium of $0.89 apiece. The higher March $40 strike had 12,900 calls picked up by bullish individuals who paid an average $0.25 premium per contract. Finally, the March $45 strike attracted buying interest in the amount of 3,200 calls for an average premium of $0.18 each. More than 7,000 contracts changed hands at the March $45 strike, which trumps existing open interest of just 2,489 lots. It is likely that a large portion of today’s trading activity…