Today’s tickers: RDWR, AUY, AMR, VOLC, EWZ, QLGC & JCP
RDWR – Radware Ltd. – Speculation that Radware is in talks to be sold to either Hewlett-Packard or IBM sent shares of the Application Delivery solutions provider flying this afternoon. Shares of the Tel Aviv-based company surged as much as 41.6% to $39.46, the highest recorded price in well over 5 years time, due to rumors RDWR could be purchased for approximately $945 million, or $45 per share. Not surprisingly, options traders reacted by initiating bullish stances on the stock. Traders purchased at least 3,200 in-the-money calls at the September $35 strike, the highest strike price currently available on RDWR, for an average premium of $3.30 each. Investors long the calls make money if Radware’s shares exceed the average breakeven price of $38.30 through September expiration day. Other bulls sold roughly 1,600 puts at the September $30 strike to pocket premium of $0.45 per contract. Put sellers keep the full premium received on the sale as long as Radware’s shares exceed $30.00 through expiration on Friday. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $29.55 each in the event the puts land in-the-money at expiration.
AUY – Yamana Gold, Inc. – Shares of the gold producer Yamana Gold, Inc., surged along with other gold mining firms today as gold futures jumped to an all-time high of $1272.00 per ounce. Yamana’s shares rallied as much as 5.3% to touch an intraday high of $10.65 as of 12:45 pm ET. One options player populating the January 2011 contract is positioning for the price of the underlying stock to appreciate significantly ahead of expiration. The investor enacted a bull call spread, buying 2,500 calls at the January 2011 $12.5 strike at a premium of $0.34 each, and selling the same number of calls at the higher January 2011 $15 strike for premium of $0.09 apiece. Net premium paid to establish the spread amounts to $0.25 per contract. The trader makes money if Yamana’s shares surge 19.7% over today’s high of $10.65 to trade above the effective breakeven price of $12.75 by expiration day. Maximum potential profits of $2.25 per contract are available to the gold-bull should shares of the gold producer rally 40.8% to exceed $15.00 by January expiration. The stock’s overall reading of options implied volatility is currently up 5% at 36.94% just before 12:50 pm ET.
AMR – AMR Corp. – A number of bullish tactics were employed on the operator of American Airlines this afternoon with shares of the Fort Worth, TX-based company increasing as much as 4.50% to touch an intraday high of $6.50. Plain-vanilla call buyers placed outright bullish bets on the stock, while others appear to have implemented more cautiously optimistic strategies. Traders hoping to see the price of the underlying stock extend gains through September expiration purchased some 3,100 calls at the September $7.0 strike for an average premium of $0.03 each. Meanwhile, bulls with a slightly longer time horizon looked to the October $7.0 strike where approximately 7,200 call options were picked up for an average premium of $0.22 a-pop. Investors holding these contracts are poised to profit should AMR Corp.’s shares surge 11.0% in the next several weeks to trade above the average breakeven price of $7.22 by October expiration. The purchase of 11,250 puts at the October $6.0 strike at a premium of $0.23 apiece appears to be the work of an investor engaging a delta neutral hedge. If this is the case, the trader has purchased a large chunk of AMR shares in combination with an equally offsetting number of puts. The puts serve to protect the value of the underlying stock position in case the airline operator’s shares falter ahead of expiration. The investor, in this scenario, would optimally like to see AMR’s shares continue to climb higher.
VOLC – Volcano Corp. – One contrarian options investor is positioning for a rebound in the medical equipment maker’s shares today by initiating a three-legged bullish combination play in the January 2011 contract. San Diego, CA-based Volcano’s shares fell as much as 13.2% this morning to touch down to an intraday low of $22.27, but are currently down 8.00% to stand at $23.59 as of 11:20 am ET. The optimistic options player is preparing for Volcano’s shares to reverse course, selling 2,500 puts at the January 2011 $20 strike for premium of $1.45 each, buying the same number of in-the-money calls at the January 2011 $22.5 strike for a premium of $3.10 apiece, and shedding 2,500 calls at the higher January 2011 $30 strike at a premium of $0.40 a-pop. The net cost of the transaction amounts to $1.25 per contract. Thus, the investor stands ready to accumulate profits should VOLC’s shares rally 1.5% over the current price of $23.59 to trade above the effective breakeven price of $23.95 by expiration day. Maximum available profits of $6.05 per contract pad the investor’s wallet should shares surge 27.2% to first surpass Volcano’s current 52-week high of $25.75, and ultimately exceed $30.00 by expiration in January. The overall reading of options implied volatility on Volcano Corp. jumped 17.7% to 50.23% in the first half of the trading session.
EWZ – iShares MSCI Brazil Index ETF – A large-volume bullish transaction on the EWZ, an exchange-traded fund designed to correspond to the price and yield performance of publicly traded securities in the aggregate in the Brazilian market as measured by the MSCI Brazil Index, indicates one options strategist expects the price of the underlying fund to continue higher ahead of October expiration. Shares of the fund increased 0.60% in morning trading to arrive at an intraday high of $73.27. The options optimist enacted a ratio call spread, buying 20,000 calls at the October $74 strike at a premium of $1.78 each, and selling 40,000 calls at the higher October $76 strike for a premium of $0.92 apiece. The transaction yields a net credit of $0.06 per contract. Profits in excess of the $0.06 credit start to amass for the investor if the EWZ’s shares rally 1.00% over today’s high of $73.27 to trade above $74.00 by expiration day next month. Maximum potential profits of $2.06 per contract are available to the ratio-spreader should shares jump 3.725% to settle at $76.00 at expiration. The ratio of twice as many short calls at the October $76 strike expose the trader to potentially devastating losses if shares of the EWZ exceed the effective upper breakeven price of $78.06 by expiration in October.
QLGC – QLogic Corp. – Network infrastructure products designer, QLogic Corp., attracted a bevy of bulls during the session with the value of its shares increasing as much as 2.9% to an intraday high of $16.81. QLGC was rated new ‘buy’ with a share price target of $19.00 at Capstone Investments today. Investors expecting QLogic’s shares to continue to appreciate ahead of expiration day next month picked up at least 3,700 calls at the October $17.5 strike for an average premium of $0.49 apiece. Call buyers make money if QLGC shares surge 7.00% over today’s high of $16.81 to trade above the average breakeven price of $17.99 by expiration. The October $17.5 strike calls have been popular as of late. The majority of the 6,061 lots of existing open interest at that strike were purchased. Bullish positioning may have been spurred, in part, by rumors EMC Corp. may be preparing to make a bid for the company. Options implied volatility on the QLGC currently stands 10.00% higher at 42.75% as of 12:25 pm ET.
JCP – J.C. Penney Co., Inc. – Shares of the department store operator rallied as much as 7.9% in the first half of the trading day to secure an intraday high of $24.10 on news retail sales rose in August at the fastest pace in five months. It looks like some JCP bulls are banking gains by rolling previously established long call positions up to a higher strike price in the September contract. Investors exchanged approximately 9,000 calls at both the September $21 strike and the September $23 strike. The September $21 strike call options were likely originally purchased back on August 20 and September 13 for an average premium of $0.96 per contract. Today, the sharp rally in JCP’s shares, boosted premium on the now deep in-the-money calls, allowing traders to sell all 9,000-something contracts for an average premium of $2.44 apiece. Average net profits on the sale amount to $1.48 per contract. Next, it looks like the same traders rolled bullish sentiment up to the September $23 strike where about 9,000 in-the-money calls were purchased at an average premium of $0.96 each. Investors amass profits on the new position if JCP’s shares exceed the average breakeven price of $23.96 at expiration on Friday.
