Marvell Technology Group Ltd. Call Options Fly Off The Shelves
by Option Review - June 11th, 2010 4:15 pm
Today’s tickers: MRVL, EFA, MSFT, PFE, BMY, BAC, GME, NFLX & PM
MRVL – Marvell Technology Group Ltd. – The semiconductor maker popped onto our ‘most active by options volume’ market scanner late in the session due to rampant call buying in the June and July contracts. Marvell’s shares are higher by 1.65% to $17.74 just before 3:30 pm (ET). Near-term optimistic individuals itching for continued appreciation in the price of the underlying stock purchased approximately 9,000 calls at the June $18 strike for an average premium of $0.33 apiece. Investors long the calls make money if Marvell’s shares rally at least 3.325% from the current price of $17.74 to exceed the average breakeven point to the upside at $18.33 by expiration day in one week. Buying interest spread to the July $18 strike where bullish players paid an average premium of $0.89 per contract to take ownership of some 5,100 call options. Traders holding these contracts accumulate profits as long as MRVL’s shares increase 6.5% to surpass the average breakeven price of $18.89 by July expiration.
EFA – iShares MSCI EAFE Index Fund – The implementation of a large-volume short strangle on the EFA, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the MSCI EAFE Index – an index which includes stocks from Europe, Australasia and the Far East, indicates one options strategist expects shares of the underlying fund to remain range-bound through September expiration. Shares of the EFA are trading lower by 0.63% to stand at $48.53 with less than 45 minutes remaining before the closing bell. The investor responsible for the strangle sold 16,000 puts at the September $42 strike for an average premium of $1.54 apiece in combination with the sale of the same number of calls at the higher September $52 strike for an average premium of $1.15 each. Gross premium pocketed on the transaction amounts to $2.69 per contract. The strangle-seller keeps the full premium received as long as the fund’s share price trades within the boundaries of the strike prices described through expiration. The short stance assumed in both call and put options expose the responsible party to losses in the event that shares rally above the upper breakeven price of $54.69, or if shares trade beneath the lower breakeven point at $39.31 at expiration. We note that shares of the fund have not…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggSavient-Bull Buys Ratio Call Spread
by Option Review - December 18th, 2009 4:13 pm
Today’s tickers: SVNT, JBLU, ROST, RVSN, MRVL, RYL, ARIA, WLP, S, BCR & ORCL
SVNT – Savient Pharmaceuticals, Inc. – A ratio call spread implemented on biopharmaceutical company, Savient Pharmaceuticals, this afternoon indicates shares may shift higher by expiration in January 2010. SVNT’s shares increased 1% during the session to stand at $12.80. The spread involved the purchase of 2,400 calls at the in-the-money January 12.5 strike for an average premium of 1.34 apiece, marked against the sale of 4,800 calls at the higher January 14 strike for 62 pennies each. The net cost of the trade amounts to just 10 cents per contract. The investor responsible for the bullish play stands ready to accrue maximum potential profits of 1.40 per contract if the stock jumps to $14.00 by expiration. The increase in demand for option contracts on the stock boosted Savient’s option implied volatility reading 15% during the trading day from an opening reading of 75.22% to an intraday high of 86.56%.
JBLU – JetBlue Airways Corp. – Investors initiated bullish stances on JetBlue this afternoon despite the 2% decline in value of the underlying shares during the trading session to $5.48. Fresh call positions were taken in the March and June contracts by traders preparing for a JBLU-rally. A chunk of 5,000 calls were purchased at the March 6.0 strike for a premium of 40 cents per contract. The investor responsible for the transaction breaks even if shares of the airline increase 17% over the current price to $6.40 by March’s expiration. Option traders purchased at least 1,700 calls at the June 6.0 strike for 65 cents premium apiece. Profits accumulate if and when JBLU’s shares rise 21.5% to surpass the breakeven point at $6.65. The increase in investor demand for option contracts on the stock lifted option implied volatility 13.57% to an intraday high of 55.55%.
ROST – Ross Stores, Inc. – The second-largest off-price retailer of brand-name apparel and home accessories in the U.S. appeared on our ‘hot by options volume’ market scanner in late-afternoon trading. One investor established a ratio put spread on the stock in the February 2010 contract. Shares are down 1% to $43.88 with approximately one hour remaining in the trading session. The option trader purchased 2,000 puts at the in-the-money February 45 strike for 2.60 apiece, and sold 4,000 puts at the lower February 42.5 strike for 1.40 each. The investor…
Mixed Sentiment on BAC Pits Bulls Against Bears
by Option Review - December 4th, 2009 4:11 pm
Today’s tickers: BAC, XRX, XLF, CAR, XLU, BIG, SLM, TTWO, MRVL & TSN
BAC – Bank of America Corp. – Investors employed two contradictory option strategies in the February contract on Bank of America today. One trader initiated a large bearish risk reversal while the other put on a bullish call spread. BAC’s shares rallied 3.5% this afternoon to $16.30. The pessimistic investor appears to have sold 30,000 in-the-money call options at the February 15 strike for 1.74 apiece in order to purchase 30,000 puts at the same strike for 84 cents each. The reversal results in a net credit of 90 cents per contract to the trader. Perhaps this individual expects shares to decline beneath the $15-level by expiration so he may retain the full 90 cent credit on the trade. Bullish trading in the same February 2010 contract suggests shares are set to rally higher in the next few months. An optimistic investor purchased 10,000 calls at the February 17 strike for 89 cents each, and sold the same number of calls at the higher February 19 strike for 34 cents apiece. The net cost of the spread amounts to 55 cents per contract. Maximum potential profits of 1.45 are available to the investor if shares increase more than 16.5% from the current price to a new 52-week high of $19.00 by expiration in February.
XRX – Xerox Corp. – One investor utilized the risk reversal strategy in order to take a long-term bullish stance on Xerox. Shares moved 1% higher this afternoon to $7.85. It looks like the trader sold 20,000 puts at the January 2011 7.5 strike for a premium of 1.15 each to partially finance the purchase of 20,000 calls at the same strike for 1.60 apiece. The net cost of the reversal amounts to 45 cents per contract. The investor profits if shares surpass the breakeven price of $7.95 within the next 12 months to expiration.
XLF – Financial Select Sector SPDR ETF – Shares of the XLF rallied 0.75% in afternoon trading to stand at $14.46. Bullish options activity on the fund suggests shares are likely to appreciate within the next several months. Optimistic investors purchased 69,000 in-the-money call options at the March 14 strike for an average premium of 1.36 per contract. XLF shares must rise 6% from the current price before profits accumulate above the breakeven point at $15.35. Shares last…
Valero Upgrade Prompts Call Buying
by Option Review - October 15th, 2009 6:56 pm
Today’s tickers: VLO, SU, EEM, MRVL, PWR, IMAX & AMED
VLO – Valero Energy Corp. – New ratings coverage of ‘equal weight’ by analysts at Morgan Stanley today sent option traders into a call buying frenzy on the oil refining company. Shares of VLO are currently soaring 6.5% higher to stand at $20.03. Call-volume surged at the October 20 strike where more than 16,100 contracts were purchased for an average premium of 8 pennies apiece. The October 20 strike is now in-the-money by 3 cents, allowing investors to exercise their right to buy shares of the underlying stock for an effective price of $20.08 each. Traders may also decide to accumulate short term gains if shares rally through the breakeven point at $20.08 ahead of expiration tomorrow.
SU – Suncor Energy, Inc. – A couple of bullish calendar rolls caught our attention this afternoon on Suncor Energy. Shares of the Canada-based energy firm slipped nearly 1% lower to stand at $38.99. The first of the two calendar rolls involved 2,000 calls at the December 32 strike which were originally purchased for 3.50 apiece on September 9, 2009, and sold today for 7.50. Net profits on the sale amount to 4.00 per contract. The trader expanded the size of the new call position at the January 47.5 strike by buying 3,000 lots for about 75 cents apiece. The larger of the two transactions involved a larger number of call options. Approximately 11,000 calls were originally bought for a maximum of 2.30 each on September 8, 2009. Today the position was closed by the investor who sold the calls for 5.05 per contract. Net profits on the transaction amount to an average 2.75 per contract. Again, the calls were rolled to the January contract but this time the investor paid 1.85 to buy 18,000 calls at the January 42.5 strike. Profit-taking aside, the investor or investors responsible for the calendar rolls are expecting shares of SU to rise by expiration in January.
EEM – iShares MSCI Emerging Markets Index ETF – Shares of the emerging markets fund fell 0.5% this afternoon to $41.32. We observed bullish transactions take place on the stock despite the decline in shares. One investor banked gains by rolling a bullish call position forward in the December contract. It appears the trader originally purchased 10,000 calls at the now December 42 strike for 1.08 apiece on October…
Sizeable Combination Trade in Regions Financial
by Option Review - October 1st, 2009 4:31 pm
Today’s tickers: RF, GNW, EEM, RHT, MRVL, CMCSA & LEAP
RF - Banking services firm, Regions Financial, jumped onto our ‘most active by options volume’ market scanner this afternoon after one investor exchanged 120,000 option contracts on the stock. The investor made bullish moves on RF despite the more than 3.5% decline in shares to $5.97. It appears the trader sold puts short 40,000 times at the May 6.0 strike for an average premium of 1.30 apiece, in order to finance the purchase of a bull call spread. The investor constructed the spread by buying 40,000 calls at the January 6.0 strike for one dollar each and simultaneously selling 40,000 calls at the higher January 10 strike for 12 pennies apiece. The trader receives a net credit of 42 cents per contract on the three-legged strategy. He retains the full credit of $1,680,000 as long as shares remain higher than $6.00 through expiration in May of 2010. However, additional profits are available if shares of Regions Financial rally by expiration in January. Maximum potential profits on the call spread amount to 4.0 per contract – or a total of $16,000,000 – if shares of RF surge 68% from the current price to $10.00 before the calls expire in January. – Regions Financial Corp. –
GNW - The financial security company experienced a more than 5.5% decline in shares to arrive at the current price of $11.28. Bearish investors active on GNW today exchanged more than 3.5 put options to every single call option in play on the stock. One investor took a long-term pessimistic stance by initiating a ratio calendar spread. The transaction involved the purchase of 10,000 puts at the December 10 strike for an average premium of 1.22 per contract, spread against the sale of 15,000 puts at the lower January 2011 7.5 strike for 1.70 each. The investor takes a credit on the trade because he received richer option premium on the sale of a greater number of puts set to expire in January 2011. The placement of this trade suggests the investor is bracing for potential declines in GNW through expiration in December. – Genworth Financial, Inc. –
EEM - Shares of the emerging markets exchange-traded fund have dipped 2.5% lower to $37.90, prompting one trader to establish a bearish risk reversal in the January contract. The trader targeted the January 38 strike to sell 12,000 just out-of-the-money…
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(