Are Option Players Bullish on Toyota?
Wednesday was a big day on Capitol Hill for ^TM^, with President Akio Toyoda stepping in front of lawmakers. Toyoda took “full responsibility” for the damage done to the company’s reputation, blaming a desire for growth rather than the “speed at which we were able to develop our people and our organization,” adding that the company “should sincerely be mindful of that.” Toyoda also apologized for “any accidents that Toyota drivers have experienced.” The automaker saw its stock increase on the day, which triggered some action in the option pits.
The slightly out-of-the-money March 75 call saw nearly 3,500 options trade by the end of the day, suggesting that some option players may be bullish on the shares. Technically, this is understandable, as TM has performed well in the past. Should these options translate to some new positions, what is needed from the stock for the March 75 call to be profitable?
A bullish March 75 trader would have paid somewhere around $2.10 for the position. This means that the stock would have to advance past $77.10 (the strike price plus the premium paid) by expiration in order to make a profit. Of course, this position could always be closed should the stock reach a trader’s target. The danger is that the stock faces some potential overhead resistance, which could make the bullish waters rough to wade into. This fact was not lost on options players as well, as slightly more than 6,500 puts crossed the tape on the March 70 contract.
Dan Passarelli is the author of the book Trading Option Greeks and founder and CEO of Market Taker Mentoring LLC. Passarelli began his trading career trading on the floors of the Chicago Board Options Exchange and the Chicago Board of Trade making markets in options. He regularly shares trading insights and educational tips in his options blog (markettaker.com/options_blog/). Dan can be reached through his website MarketTaker.com and can also be followed on Twitter at twitter.com/Dan_Passarelli.