Today’s tickers: URBN, GE, INTC, MSFT, RIMM, ELN, SWY, GS & C

URBN – Urban Outfitters Inc. – On July 22 shares in retailer, Urban Outfitter closed at $32.57. the same day an investor put into action a 40,000 lot put spread through the purchase of 30 strike puts expiring in January 2010 and selling the same amount of puts at the 15 strike expiring at the same date. The net cost of doing this at the time – the difference between the premiums – was $450 per 100 shares. We’re not sure why the investor focused on such a long expiration date, but clearly was of the volition that the retail sector if not the entire economy was heading south. Today was payday as this investor closed the trade out at $1100 per 100 shares. The fact that Urban’s shares had reached the lower strike price meant that the maximum profit potential from the trade was met. Given the magnitude of the position, it’s unlikely an investor was playing this size of position naked. In other words, he probably held a long underlying position in the stock - perhaps not as big as the underlying option position, but whatever happened, today looks like a pretty nice pay day for this investor.

GE – General Electric – We always try to use our views on the option market to illustrate the forward thinking nature of investors who use them. Sometimes call and stock buying reinforce one another, which sometimes helps our analysis. At other times we find ourselves trying to piece together a jigsaw. The fact that options offer leverage is a major appealing factor since it offers the investor the ability to put on a position and leave it there instead of having to worry too much about…

Once again, everything is proceeding exactly as I have foreseen.

On Monday afternoon, I said: "S&P must hold 900 of course, no sense in making a play to the upside as the danger of gapping below 900 and triggering a massive sell-off looms for tomorrow.  Since we’re 300 points away from getting back to today’s open, there’s not much of a sense of urgency to reposition here" and our bearish outlook has served us well the past two days as we did indeed fail to hold 900 on Tuesday’s close and we did indeed gap down into a huge sell-off, heading for our 840 target test along with the Dow 8,200 line I said would be our BUYBUYBUY point.

With Monday’s DXD Dec $65s at $19.70 (up 67%) it’s mission accomplished on the short side and we looked to rebalance to 50/50 in yesterday’s sell-off and discussed the idea of moving to (dare I say it?) 60:40 bullish if we hold 8,200.  To that end, I listed 22 hedged plays for members in yesterday’s post based on yesterday’s very important educational post: "How to Buy Stocks for a 15-20% Discount."  Of the group of diversified dividend payers, that includes, MSFT, WMT, KMP, PRU, KFT and even the horribly performing GE - the …

Today’s tickers: AXP, STO, XLE, XLF, LGF and BBY

AXP – American Express – Two days after having converted to bank status the WSJ reveals that credit-card giant is applying for $3.5 billion under the governments TARP program. Investors reacted negatively lopping 7.6% off Amex’s share price to $20.69 and creating a fresh one-year low today. Meanwhile option traders couldn’t seem to get enough put options locking into a bearish view on the stock. Recently analysts and the media have raised the specter that credit card companies could be the next shoe to drop as the credit crunch not only makes it hard for card providers to fund debt, but also consumers struggle to repay card loans. In the December contract buyers locked into the right to sell Amex shares from the 20 strike down to the 15 strike, where 2,000 contracts changed hands at a premium of around 1.15. That would imply a break even share price at expiration of $13.85. At the 20 strike some 8,000 puts were traded. The picture has been getting worse for Amex, which has lost around two-thirds of its value from its 52-week high. It recently tried to prove that it had sufficient cash-to-hand for the next year while the lock-up in the credit card loan market dried up. A round of job losses applied to 10% of its workers was also announced.

STO – StatoilHydro ASA – Norway’s largest oil and natural gas producer may have lost around 37% of its production and can’t say when the Snorre A platform will be open again according to the company today. During routine maintenance a leak was discovered and has forced the company to shutter production at the Vigdis oil field, which is processed at the Sno…

Today’s tickers: GM, XLF, GE, HIG, SBUX, FMCN & LBTYA

GM – General Motors – Trading in options on the ailing auto manufacturer was robust with close to 90,000 contracts changing hands by 11:30. Shares made a fresh 52-week low and at the time of writing have shed 17% to $2.80 as option traders piled on more bearish bets against the company. Call options granting rights to buy the stock at prices now above the share price were sold aggressively at the November and December 3.0 and 4.0 strikes. At the November 4.0 strike puts investors bought over 3,000 lots and so reserved rights to sell shares at a healthy premium to the current trading price.

XLF – Select Sector Financial SPDR – With no signs of a let-up in the financial sector, shares are once again taking a beating and stand 3.3% lower at $13.33. However, there could have been some signs of optimism playing out in the deferred expiration dates this morning through XLF options. In the January 2009 contract investors sold around 5,000 put options at the 12.0 strike at a premium of 1.10. Meanwhile they bought similar amounts of out-of-the-money calls at the 21.0 strike for a tiny 10 cent premium. The strategy appears to be a reversal style in the expectation that sometime during the next couple of months the sellers will burn themselves out leaving no option but for a rebound of the survivors. In the January 2010 contract 6,000 call options granting rights to purchase shares at a price of $15.00 were bought at 2.35, while the same amount of puts were traded at the middle of the market at a richer premium of 4.15. While this combination isn’t crystal clear, it does smack of a reversal type strategy with t…