Stamps.com Option Traders Hit The Jackpot On UPS News

Stamps.com Inc. STMP shares jumped higher by more than 22% on Tuesday after the company announced a new partnership with United Parcel Service, Inc. UPS.

As part of the new partnership, Stamps.com at-home printing services will include discounted shipping rates due to its inclusion in the new UPS Digital Access Program. Stamps.com users will get up to 55% discounts on daily shipping rates and will not be subject to various surcharges.

Options Winners

While Stamps.com investors cheered the news, some large options hit the jackpot on Tuesday:

• Oct. 25 Stamps.com calls with an $85 strike price and 193 open interest gained 2,683%.
• Nov. 15 Stamps.com calls with an $80 strike price and 319 open interest gained 193.3%.
• Nov. 15 Stamps.com calls with an $85 strike price and 267 open interest gained 336.0%.
• Nov. 15 Stamps.com calls with a $90 strike price and 782 open interest gained 306.6%.
• Jan. 17,2020 Stamps.com calls with a $90 strike price and 126 open interest gained 190.7%.

The weekly call holders were the biggest winners, but even the longer-dated out-of-the-money $90 call holders saw their positions nearly triple in value after Stamps.com shares took off on Tuesday. At least one UPS option trader seemingly got burned on the news after making a last-minute move on Monday just prior to the close.

At 3:20 p.m. on Monday, Benzinga Pro subscribers were alerted to an unusually large UPS option trade. The trader bought 500 UPS puts with a $113 strike price expiring on Friday. The trade was executed at the ask price of $1.031 and represented a $51,550 bearish bet.

UPS shares traded lower by 2% on Tuesday following the Stamps.com deal news but rebounded well above the $113 strike price of the puts after initially tumbling below $112. Those $113 weekly UPS put options traded lower by 59% in mid-day trading.

See Also: Spurned By USPS Denial To End Exclusivity Agreement, Stamps.com Takes Its Ball And Goes Elsewhere

Twitter Reacts

The big Stamps.com option gains were enough to get some twitter users talking on Tuesday.

That explains the call buying last 2 weeks https://t.co/HWoLzKiHQU

— Quoth the Raven (@QTRResearch) October 21, 2019

$STMP Call buyers are gonna be enjoying today

— Ryan Davidson (@RyanSTTrader) October 22, 2019

There is an OI of 193 $STMP this week $85 calls. Someone's going to make a fortune on it tomorrow! pic.twitter.com/2bqwx2JngJ

— IT (@IncredibleTrade) October 21, 2019

Benzinga’s Take

When big, unexpected news hits, option traders can make the type of extreme gains mentioned above due to the leveraged nature of options contracts. However, as Stamps.com puts holders can attest, that leverage works both ways. Option traders can just as easily see positions become worthless overnight if the wrong headline hits.

Stamps.com traded around $93.88 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.