H&R Block (HRB) Sees Put Spreads in October, January (Chart Analysis)

HRB Oct 17 Puts (Yahoo Finance)
Interesting option activity occurred in H&R Block's (HRB) out-of-the-money put options in October 2011 and January 2012. I got the alert from CBOE on Twitter. I follow their feed (@CBOE).
"H&R Block- $HRB January 12.50 and Jan 17 puts active on 36K contracts into April 18 tax deadline" (source)

It was also featured on CrimsonMind.com's Unusual Option Activity Feed in detail:
"9,000 Oct 17 puts were purchased for $1.73, 9,000 Jan 12 puts were sold for $0.66, 7,500 Jan 15 puts were purchased for an average premium of $1.425 and 7,500 Jan 10 puts were sold for $0.35. Total of 33557 puts traded compared to the 10 day average volume of 3030." (courtesy of CrimsonMind.com)

HRB Jan 15-12.5-10
The trades look like put spreads. Find more information on the trades at WSJ and the blog Sea Change of Opportunity, which said 500k shares were bought at $17.60.

$HRB capitulated in October of last year (2010) when news dropped that HSBC wouldn't fund "refund anticipation notes" anymore due to new IRS rules. On April 7, 2011, HRB warned that the loss of clients would lower EPS by $0.05. From Reuters:
HRB (FreeStockCharts.com)
"H&R Block Inc said it would take a charge in the fourth quarter, as it lost some clients due to its inability to offer refund anticipation loans, sending its shares down 2 percent in extended trade.

The top U.S. tax preparer will incur a charge of about 5 cents a share in the quarter ending April 30."
The stock is trading inside of a 3-year descending channel which started in 2008. Since the "RAL" scare in October, HRB is up 80% off of its low. You can see the two near-term trend lines HRB must hold in order to test descending channel resistance ($18.50-19.30). The yellow circle shows where the put spreads would profit, whether as a hedge against shares or a play on downside volatility. HRB implied volatility is at 35 and historical volatility is at 24.65 on the ISE. I don't know the exact nature of these trades if they were based solely on implied volatility. Please comment if you do. Interesting trades.


More analysis (free)

Oppenheimer Discusses H&R Block (HRB) - Benzinga

Early Dip Puts Market on Notice 04-14-2011 - Xpound Blog via Benzinga

The Returns Have Already Been Filed On H&R Block by Steve Alexander - iStockAnalyst

H&R Block: The Panic's Over - Seeking Alpha

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