Bullish Player Acts on Gymboree Corp. Speculation with Ratio Call Spread
by Andrew Wilkinson - October 2nd, 2010 6:32 am
Today’s tickers: GYMB, EQIX, JPM, SLV, STI, MBI, EEM, SNP & GDX
GYMB - Gymboree Corp. – One options player populating the retailer of children’s clothing and accessories waited until the twilight of the final trading day of the week to initiate a bullish stance on the stock. Gymboree’s shares surged as much as 21.425% at the start of the session to touch an intraday high of $50.44 on speculation the firm may put itself up for sale. The rumors drove implied volatility on Gymboree up 20.10% to 48.52% this morning along with the price of the underlying shares and spurred demand for options. Shares as well as volatility cooled somewhat by late afternoon, with shares up 16.5% at $48.40 and volatility higher by 13.5% to 45.85%, as of 3:00 pm ET. The patient bullish player looked to the February 2011 contract to establish a ratio call spread, purchasing 1,050 calls at the Feb. 2011 $48 strike at a premium of $4.80 each, and selling 2,100 calls at the higher Feb. 2011 $55 strike for a premium of $1.85 a-pop. Net premium paid to initiate the spread reduces down to $1.10 per contract. Thus, the trader is poised to profit should GYMB’s shares rally 1.45% over the current price of $48.40 to surpass the effective breakeven price of $49.10 by February expiration day. Maximum potential profits of $5.90 per contract are available to the ratio-spreader if the retailer’s shares surge 13.6% to settle at $55.00 at expiration. The greater proportion of sold calls expose the trader to losses should Gymboree’s shares explode higher to exceed the effective upper breakeven price of $60.90 ahead of expiration day in February. Analysts at Susquehanna raised their share price target on the stock to $60.00 from $48.00 after the Wall Street Journal’s website said bankers were looking into the possibility that Gymboree could be sold to private equity.
EQIX - Equinix, Inc. – The provider of global data center services appeared on our ‘hot by options volume’ market scanner in…
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Bulls Eye Options on MGM Resorts International Ahead of Q2 Earnings
by Andrew Wilkinson - July 27th, 2010 4:55 pm
Today’s tickers: MGM, SLV, CISG, GENZ, XRX, JNPR & DD
MGM – MGM Resorts International – The operator of casino resorts attracted bullish options players this afternoon with the price of the underlying stock rallying as much as 3.65% to an intraday high of $11.36. It looks like investors expecting shares to continue higher ahead of August expiration purchased call options. The most optimistic of individuals picked up approximately 5,200 calls at the August $13 strike for an average premium of $0.21 each. Call buyers at this strike make money if MGM’s shares surge 16.3% to trade above the average breakeven price on the upside at $13.21 by expiration day next month. Other bullish traders who are perhaps hoping shares can retain the present rally, but not looking for shares to move much higher ahead of expiration in August, sold 3,000 puts at the August $10 strike for an average premium of $0.37 each. If investors are selling these puts outright, they walk away with the full premium received on the transaction as long as MGM’s shares exceed $10.00 through expiration day. Investors populating MGM Resorts International today exchanged more than 2.2 call options for each single put option in play on the stock as of 3:45 pm ET. MGM is scheduled to report its second-quarter results ahead of the opening bell of August 3, 2010.
SLV – iShares Silver Trust ETF – Shares of the iShares Silver Trust fell more than 2.90% to $17.26 in late afternoon trading inspiring some traders to load up on put options. Fresh put activity was most heavily concentrated in the September contract where current put volume at in- and out-of-the-money strikes exceeds previously existing open interest. Investors bracing for further bearish movement in the price of the SLV’s shares purchased 1,900 in-the-money puts at the September $18 strike for an average premium of $1.17 apiece. In-the-money put buyers are prepared to profit should shares of the fund decline another 2.5% to slip beneath the average breakeven point on the downside at $16.83 by September expiration. Put volume was heaviest at the September $16 strike where more than 16,700 contracts changed hands by 3:25 pm ET. It looks like investors purchased at least 14,400 of those lots for an average premium of $0.29 each. Shares of the fund must fall 9.00% from the current price before September $16 strike put buyers breakeven at a…
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Buy-Write Strategist Sinks Teeth into Apple Call Options
by Andrew Wilkinson - July 6th, 2010 5:19 pm
Today’s tickers: AAPL, AUXL, CSX, CTRP, SNDK, CPB & SLV
AAPL – Apple, Inc. – Options investors fluttered about the iPhone maker today populating the stock with various trading strategies and exchanged more than 234,000 contracts on the stock by 3:40 pm (ET). Apple’s shares are up 0.40% to stand at $247.95 with the final bell set to ring in approximately 15 minutes, but earlier in the session the stock rallied as much as 2.37% to touch an intraday high of $252.80. One strategist expecting the price of the underlying stock to increase sharply ahead of July 16 expiration day initiated a buy-write transaction today. It looks like the investor sold roughly 1,300 calls at the July $280 strike for an average premium of $6.00 apiece and simultaneously purchased Apple shares at an average price of $251.90 each. The premium received for writing the call options effectively reduces the average price paid to purchase shares of the underlying stock to $245.90 apiece. Thus, the covered call strategy positions the investor to walk away with maximum gains of 13.87% should Apple’s shares trade above $280.00 at expiration. Shares of the iPad manufacturer have not exceeded $279.01 in the past 52-weeks. But, the bullish player certainly reduced the cost of getting long Apple shares and is positioned to benefit nicely from upward momentum in the price of the underlying stock whether or not shares are called from him at expiration day in July.
AUXL – Auxilium Pharmaceuticals, Inc. – Shares of the specialty biopharmaceutical company fell as much as 6.85% during the trading session to attain a new 52-week low of $19.99. AUXL’s shares declined following a downgrade to ‘perform’ from ‘outperform’ at Oppenheimer this morning, and are currently down 4.3% to close the trading day at $20.54. The decline in Auxilium’s shares today inspired one options investor to purchase a plain-vanilla debit put spread on the stock. The trader purchased 2,000 now deep in-the-money puts at the July $22.5 strike for a premium of $2.85 apiece, spread against the sale of the same number of puts at the lower July $20 strike for a premium of $1.20 each. The net cost of the transaction amounts to $1.65 per contract, thus positioning the bearish player to accrue maximum potential profits of $0.85 per contract if shares of the underlying stock trade below $20.00 by July expiration day.
CSX – CSX Corp. –…
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Bullish Investors Flock to Popular, Inc. as Shares Reach a New 52-Week High
by Andrew Wilkinson - April 13th, 2010 4:40 pm
Today’s tickers: BPOP, SLV, XRT, RCL, USO, MRO, AVP, PG & CROX
BPOP – Popular, Inc. – Shares of the largest bank in Puerto Rico surged 26.5% during the trading session to a new 52-week high of $3.86 after the firm was raised to ‘buy’ from ‘neutral’ and given a target share price of $3.50 at B. Riley & Co. Popular’s shares took off running on news the company may sell its Evertec unit and some other businesses for $1 billion. Options traders enacted bullish strategies on the stock to position for continued upward movement in the price of the underlying stock. Plain-vanilla call buying took place at the April $3.5 strike where approximately 9,400 now in-the-money contracts were picked up for an average premium of $0.14 apiece. Other traders displayed optimism on Popular, Inc. by shedding put options. Roughly 4,500 puts were sold short at the April $3.0 strike for a premium of $0.06 each. Investors keep the premium received as long as shares trade above $3.00 through expiration day on Friday. Similar bullish activity was observed in the May contract today. Investors paid an average premium of $0.28 per contract to take ownership of nearly 8,000 in-the-money call contracts at the May $3.5 strike price. Additionally, traders expecting shares of BPOP to remain above $3.50 through May expiration shed 6,200 put options at the May $3.5 strike to receive an average premium of $0.33 each. Put sellers at this strike price keep the full premium pocketed on the trade as long as shares of the underlying stock exceed $3.50 through expiration day. Investors short the puts are apparently happy to have BPOP-shares put to them at an effective price of $3.17 each should the put options land in-the-money at expiration. Options players exchange 83,855 contracts at Popular, Inc. as of 3:00 pm (ET), which represent more than 55% of the total existing open interest on the stock of 151,847 contracts.
SLV – iShares Silver Trust ETF – Shares of the silver ETF, an exchange-traded fund whose share price typically reflects the price of silver owned by the Trust at any given time less the Trust’s expenses and liabilities, increased 0.35% in late afternoon trading to stand at $17.87. Options activity on the stock, however, indicates at least one investor is expecting the price of the underlying shares to decline ahead of July expiration. It looks like the bearish…
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Options Trader Sends Bullish Signal by Enacting Ratio Call Spread on Salesforce.com
by Andrew Wilkinson - April 12th, 2010 5:05 pm
Today’s tickers: CRM, CPB, VALE, GDX, CNX, SLV, OSIP, BONT, UA & XRT
CRM – Salesforce.com, Inc. – A large-volume ratio call spread on the provider of customer relationship management services this afternoon implies one options investor expects CRM shares to rally significantly by August expiration. Salesforce.com’s shares increased as much as 1.83% today to reach a new 52-week high of $81.23 during the current session. According to a Reuters report this weekend, analysts at Deutsche Bank maintain their ‘buy’ rating on the stock and raised their share price target on CRM to $110 from $100. The optimistic options trader populating the stock this afternoon purchased 13,000 calls at the August $85 strike for a premium of $5.00 apiece, and sold 26,000 calls at the higher August $100 strike for $1.05 each. Net premium paid by the investor for the transaction amounts to $2.90 per contract. Maximum available profits of $12.10 per contract accumulate for the trader if shares of the underlying stock surge at least 23% from the new 52-week high of $81.23 to reach $100.00 by August expiration. The investor starts to make money as long as CRM’s shares trade above the effective breakeven point at $87.90 ahead of expiration day.
CPB – Campbell Soup Co. – Options traders anticipating a sharp increase in the price of Campbell Soup Co.’s shares by November expiration scooped up record numbers of call options on the global manufacturer and marketer of branded convenience food products today. CPB’s shares traded 0.25% higher in late afternoon trading to $35.45, which is just off their current 52-week high of $35.80 (attained back on December 2, 2009). Campbell-bulls purchased approximately 5,200 calls at the November $40 strike for an average premium of $0.55 per contract. Investors holding these contracts are prepared to profit should Campbell’s share price jump 14.4% from the current price to exceed the average breakeven point to the upside at $40.55. Investors exchanged roughly 5,925 option contracts on CPB during the trading session, which represents 56% of the total existing open interest on the stock of 10,567 lots.
VALE – Vale S.A. – Diverse bullish options strategies employed on Brazilian metals and mining company, Vale S.A., today indicates investors are expecting the price of the iron-ore maker’s shares to appreciate in the next few months. Vale’s shares rallied 1.20% at the start of the session to an intraday high – and new…
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Option Player Cops a Strangle on ConocoPhillips
by Andrew Wilkinson - February 17th, 2010 8:10 pm
Today’s tickers: COP, POT, BAC, HPQ, AMZN, SLV, SPWRA, XEC, WFMI & C
COP – ConocoPhillips – A short strangle employed in the May contract on ConocoPhillips this afternoon suggests one investor expects shares of the underlying stock to remain range-bound through expiration. COP’s shares are down 1.25% to $49.29 with approximately thirty minutes remaining in the trading session. The trader ‘copped’ a strangle play by selling 3,000 puts at the May $46 strike for a premium of $1.77 apiece in combination with the sale of 3,000 calls at the May $52.5 strike for an average premium of $1.13 each. The investor responsible for the transaction pockets a gross premium of $2.90 per contract, and keeps the full amount of premium if ConocoPhillips’ shares trade within the confines of the strike prices described through expiration in May. The short position undertaken in both calls and puts leaves the trader vulnerable to potentially devastating losses should COP-shares swing dramatically in the next few months. Losses accumulate for the investor if shares rally above the upper breakeven price of $55.40, or if the price of the stock plummets through the lower breakeven point at $43.10, ahead of expiration day.
POT – Potash Corp. of Saskatchewan, Inc. – Fertilizer and feed products manufacturer, Potash Corp., attracted bullish options traders this afternoon. POT-shares are up 0.75% today to $114.01 just ahead of the closing bell, which contributes to the more than 14.50% rally in the price of the underlying stock since February 5, 2010, when shares stood at $99.36. Optimistic trading patterns appeared in the March contract where one investor established a ratio call spread. The transaction involved the purchase of roughly 4,500 calls at the March $125 strike for a premium of $1.77 apiece, marked against the sale of about 9,000 calls at the higher March $135 strike for an average premium of $0.52 each. The net cost of the ratio spread amounts to $0.73 per contract. Maximum potential profits of $9.27 per contract pad the investor’s wallet if Potash’s shares rally sharply by 18.50% over the current day’s price to reach $135.00 by March expiration. Shares must increase at least 10.25% before the investor breaks even on the spread at a share price of $125.73.
BAC – Bank of America Corp. – B of A investors have enjoyed an 8.75% rebound in the financial firm’s share price to $15.66 today, up from…
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Hewlett-Packard Bull Dabbles in Call Options
by Andrew Wilkinson - January 28th, 2010 4:24 pm
Today’s tickers: HPQ, GS, XLE, QCOM, JPM, TM, SLV, EK, GMCR & TYC
HPQ – Hewlett-Packard Co. – Shares of technology giant, Hewlett-Packard Co., are down 3.5% to $47.70 this afternoon, but the actions of one option trader indicates the stock may rebound by expiration in March. Call activity in the March contract effectively mimics a ratio call spread strategy, which positions the investor to benefit from a move higher in share price in the next couple of months. The ratio call spread took place at the March $46 strike where 5,000 in-the-money calls were purchased for a premium of $3.20 apiece. At the higher March $50 strike, 10,000 call options were sold for an average premium of $1.15 each. Assuming both trades are the work of one investor, the net cost of the bullish move amounts to $0.90 per contract. Maximum potential profits of $3.10 per contract accrue to the upside if shares of the underlying rally to $50.00 by expiration. We note that shares of Hewlett-Packard last traded above $50.00 as recently as January 21, 2010.
GS – Goldman Sachs Group, Inc. – A couple of contrasting option trades caught our eye this afternoon on investment banking institution, Goldman Sachs Group. Goldman’s shares edged 1.15% higher in late-day trading to stand at $153.22. The first and nearer-term of the two transactions appeared in the March contract. The sale of more than 6,800 call options at the March $160 strike for an average premium of $4.58 apiece is a bearish signal. Investors selling the calls apparently expect to keep the premium received today because they do not see Goldman’s share price rebounding to- or above $160.00 by expiration in March. Contrary to the call selling described previously, the April contract attracted bullish sentiment. One investor purchased a call spread by picking up 2,000 calls at the April $160 strike for a premium of $5.78 each, marked against the sale of 2,000 calls at the higher April $175 strike for about $2.05 apiece. The trader paid a net $3.73 per contract to position for a rebound in GS shares by expiration in three months time. Shares must rally approximately 7% from the current price before the call-spreader breaks even at a price of $163.73. Maximum potential profits of $11.27 per contract amass if shares surge more than 14% (from $153.22) to $175.00 ahead of April expiration.
XLE – Energy Select…
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Bear Play on Silver ETF
by Andrew Wilkinson - December 29th, 2009 4:08 pm
Today’s tickers: SLV, BAC, TZA & X
SLV – iShares Silver Trust – It looks as though commodity traders have it all to play for in 2010. Raw materials prices had surged especially late in 2009 as they felt the tailwind of a declining dollar. However, an abrupt about-face helped pull the rug and several commodity prices went into a tailspin. The irony here is that it’s a strengthening global economy backed by evidence of rising demand for industrial inputs that has lifted silver and copper prices independently of the hoarding for the precious yellow metal, which grabbed all the headlines recently. Shares in the iShares Silver trust, meant to track the price of an ounce of silver are still holding well above last week’s $16.64 low, although are down today at $16.83. One investor appears to have extended protection against a fall in the price of silver by selling almost 40,000 January put options and buying the same amount of contracts in the February contract. We don’t know whether the investor is already commodity bullish and just aims to protect unnecessary losses in the event of a sudden dollar upturn, or whether this is an outright bet that the commodity rally is overdone. If the latter is the case, the investor will benefit in the event of a 10.8% decline in the price of the ETF. The option market tells us that there is a 16% chance of that happening by expiration in February.
BAC – Bank of America – Shares at the banking behemoth are 0.7% lower today at $15.18 and although implied options volatility is hardly changed at 33.6%, it does appear that the at-the-money straddle has been sold somewhat during this morning’s trade. The volume patterns at both January $15 strike calls and puts appears married and there is actually heavier volume on the put side where sellers raked in average premiums of around 31 cents during the morning. In the middle of December shares recorded a low at $14.83, while we need to glance all the way back to the start of November and well before the announcement of BoA’s new chief executive to see weaker price action that drove its shares down to $14.21. Naked selling of put options at today’s premium dictates a breakeven share price at expiration of $14.69, which is effectively where today’s put sellers are buying shares in the event…
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Hi-Ho Long-Term Silver Bulls!
by Andrew Wilkinson - November 18th, 2009 4:15 pm
Today’s tickers: SLV, EWT, CL, BG, ILMN, COH, TMO, SPG, BG, ADSK & SLM
SLV – iShares Silver Trust ETF – A bull call spread in the January 2011 contract on the silver ETF today suggests shares of the SLV may rally significantly over the next year and two months time. Shares of the SLV are currently up 0.5% to $18.23. The silver-bull purchased a ratio call spread by buying 3,000 calls at the January 23 strike for an average premium of 1.93 apiece, and selling 6,000 calls at the higher January 30 strike for about 90 cents each. The net cost of the transaction is reduced to just 13 cents per contract. Shares of the fund must rally at least 27% before the investor breaks even at a price of $23.13. The trader stands ready to accumulate maximum potential profits of 6.87 per contract if the stock surges up to $30.00 by January 2011.
EWT – iShares MSCI Taiwan Index ETF – A massive bearish play on the Taiwan Index exchange-traded fund caught our attention this afternoon with shares of the EWT down 0.5% to $12.64 in late-day trading. It appears one investor established a bearish risk reversal in the December contract to position for potential share price declines through expiration. The trader sold 31,000 calls at the December 13 strike for 20 cents premium apiece, spread against the purchase of 31,000 puts at the lower December 12 strike for 20 cents each. The sale of the calls exactly offset the cost of buying the puts. Essentially the reversal is a “free” bet that shares of the EWT will trend lower ahead of the 2010. The investor responsible for the transaction is likely long shares of the underlying fund and seeking protection to the downside. If shares fall beneath $12.00, the value of the underlying position is protected. However, if shares of the fund rally by expiration, the trader risks having shares of the stock called from him at $13.00 apiece.
CL – Colgate-Palmolive Co. – Speculation that Reckitt Benckiser Group may acquire Colgate-Palmolive spurred an all-out call option feeding frenzy on CL today and lifted shares of the U.S. company to a new 52-week high of $86.33. Investors flooded the November and December contracts, scooping up call options to position for further upward movement in the price of the underlying. The sudden surge in demand for Colgate-Palmolive options…
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Financial ETF Sees Sizeable Bull Call Spread
by Andrew Wilkinson - September 29th, 2009 4:19 pm
Today’s tickers: XLF, NKE, SLV, WAG, CVS, PSS, RYL & TCB
XLF - A large bullish trade just went across the tape on the Amex in the financial sector ETF in which a 50,000 lot call spread traded in the XLF at a 27 cent premium involving 17 and 19 strike calls. The underlying share price of $15.08 would need to rally 14.5% over the course of the next three months to allow this investor to break even. We make it mid-October last year that the XLF share price last popped above $17, while recent overhead resistance has restrained the bulls at $15.50. – Financial Select Sector SPDR –
NKE - Call options on the maker of footwear and apparel were in high demand today with shares of NKE up 1.8% to $60.02. Nike is schedule to release results for the first quarter after the closing bell today. Analysts are expecting the firm to report 97 cents per share on revenue of $4.9 billion. Option traders exchanged more than 17,400 calls at the October 60 strike on existing open interest at the strike of just 6,900 contracts. Approximately 8,100 of the calls were purchased for an average premium of 1.78 apiece. The October 60 strike calls have managed to land in-the-money this afternoon. However, investors long the calls will not begin to amass profits unless the stock rises another 3% to breach the breakeven point at $61.78. Another 6,050 calls were exchanged at the higher October 65 strike for an average premium of 40 cents apiece. The higher strike calls were both bought and sold by investors placing bets on Nike ahead of first-quarter earnings results. – Nike, Inc. –
SLV - One investor initiated a long-term bullish play on the silver exchange-traded fund amid a slight 0.25% dip in shares to $15.88. The trader looked to the November 16 strike to purchase 14,000 calls for an average premium of 90 cents apiece. At the same time, the investor spread the nearer-term purchase against the sale of 14,000 calls at the January 2012 20 strike for 2.80 per contract. The trader pockets a net credit of 1.90 per contract on the transaction. The investor is likely expecting the calls to land in-the-money by expiration in November. If this occurs, he may exercise the options and take delivery of the underlying shares for an effective price of $14.10 [$16.00 – 1.90 = $14.10]. If…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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