Call Buyers Converge On Rubbermaid
by Option Review - January 12th, 2012 2:09 pm
Today’s tickers: NWL, RIMM & EMN
NWL - Newell Rubbermaid, Inc. – Big prints in Newell Rubbermaid call options pushed the consumer products provider onto our ‘hot by options volume’ market scanner this morning. The burst of call options activity on the stock appears to be largely driven by one or more traders positioning for the price of the underlying to appreciate in the next couple of months. Shares in Rubbermaid are currently down 0.75% to stand at $17.23 as of 1:15 PM in New York. The Company is scheduled to report fourth-quarter earnings before the market opens on January 27. In-the-money call buying at the February $17 strike this morning, where some 550 calls were picked up for a premium of $0.90 each, was followed minutes later by the purchase of a large block of 10,000 calls at the Mar. $18 strike at a premium of $0.65 apiece. All told, more than 12,600 calls have changed hands at the Mar. $18 strike against open interest of just 156 contracts. Traders long these call options may profit at expiration in March if shares in Rubbermaid surge 8.2% to surpass the effective breakeven price of $18.65. We note that, while the block of 10,000 calls do not appear to be tied to any transaction in the underlying shares today, it’s possible the buyer is short the stock and using the long calls to hedge delta. The interpretation of the transaction would, in that case, change from bullish to bearish as the short stock position yields profits if shares in Rubbermaid decline. Finally, fresh put positions established at the Mar. $17 strike, where around 1,100 contracts were purchased at an average premium of $0.92, suggests some traders are poised to potentially profit should the price of the underlying stock pullback ahead of expiration day.…
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DiggOptions Fly Following Juniper Networks Disappointment
by Option Review - July 27th, 2011 4:41 pm
Today’s tickers: JNPR, IACI, KMX & NWL
JNPR - Juniper Networks, Inc. – Investors are initiating diverse options strategies on the largest maker of Internet networking equipment today in the aftermath of an earnings miss that sent shares in Juniper Networks down more than 20.0% to a new 52-week low of $24.72. It looks like some traders are bracing for shares to extend losses, while other investors position for the stock to rebound. Meanwhile, investors holding previously established bullish and bearish positions on the stock may be throwing in the towel or taking profits off the table given the nosedive in the price of the underlying today. Call and put options on JNPR are by far the most active in the front month. Traders hoping to see shares recover are buying to open positions in out-of-the-money calls, with notable fresh interest building in the August $26 strike call. The closest to-the-money August $25 strike call chances hands more than 5,400 times by 1:30 pm ET, but trading traffic here is decidedly mixed as both sellers and buyers of the contracts made their mark. Calls at the August $28 strike are the most heavily traded, with upwards of 6,600 contracts having changed hands against open interest of 1,377 positions. Sellers of these options for an average premium of $0.18 a-pop cast doubt that Juniper’s shares will recover above $28.00 ahead of August expiration in a few weeks time. Open interest is substantial in deep out-of-the-money calls, which lost nearly all of their value overnight and today trade for a penny or two post-earnings. Near-term puts are active, as well. Buyers of the August $25 strike put paid an average premium of $1.12 each for some 1,500 contracts. Put buyers profit if shares in JNPR extend losses to trade beneath the lower breakeven price of $23.88 by expiration day next month. Finally, the heaviest put action up at the August $26 and $27 strikes may be the work of an investor taking profits on well-placed pre-earnings bearish positions.…
Big Bearish Bet on Dell Pops Up Ahead of Earnings After the Close
by Option Review - February 15th, 2011 4:33 pm
Today’s tickers: DELL, AKAM, NWL & EEM
DELL - Dell, Inc. – Bearish sentiment on the personal computer maker is building in options land this afternoon ahead of Dell’s fourth-quarter earnings report after the final bell. Shares in the tech company are currently down 1.5% to stand at $13.88 just after 12:30pm in New York. One big options strategist is well-positioned to benefit from limited downside movement in the price of the underlying shares through March expiration. The investor purchased a massive put spread, picking up 25,000 lots at the March $13 strike for a premium of $0.24 each, and selling the same number of puts at the lower March $12 strike at a premium of $0.08 apiece. Net premium paid to initiate the pessimistic play amounts to $0.16 per contract. The trader starts to make money in the event that Dell’s shares drop 7.5% from the current price of $13.88 to breach the effective breakeven point on the spread at $12.84 ahead of expiration day. Maximum potential profits of $0.84 per contract are available to the put player should shares in the name plunge 13.5% lower to trade below $12.00 in the time remaining to March expiration. Dell, Inc. options are popular ahead of earnings, with more than 137,000 contracts having changed hands in early-afternoon trade. Options implied volatility is up slightly by 3.0% to stand at 36.29% as of 12:40pm.
AKAM - Akamai Technologies, Inc. – A three-legged bullish options combination play on the provider of cloud optimization services caught our eye this morning. The strategist responsible for the transaction is positioning for Akamai’s shares to continue to rise ahead of March expiration. Shares in AKAM are currently up 1.2% at $42.60 just before 11:30am in New York. The stock took a big hit last week, falling as much…
Near-Term Bulls Shop Around for Call Options at Newell Rubbermaid
by Option Review - December 1st, 2010 4:22 pm
Today’s tickers: NWL, GRS, OIH, HIG, EWZ, MBT & XOP
NWL - Newell Rubbermaid, Inc. – The global marketer of everyday commercial and consumer products popped up on our ‘hot by options volume’ market scanner during the second half of the trading session due to bullish activity in the December contract. Shares in Newell Rubbermaid are up 3.35% to stand at $17.33 with 45 minutes remaining before the final bell. Options traders exchanged more than 3,460 call options at the December $17.5 strike, versus previously existing open interest of just 980 contracts. It looks like more than 3,000 of the calls were purchased for a premium of $0.35 per contract. Plain-vanilla call buyers are prepared to make money should shares increase another 3.00% to exceed the effective breakeven point to the upside at $17.85 ahead of December expiration day. Rubbermaid’s shares last traded above $17.85 as recently as November 5, 2010.
GRS - Gammon Gold, Inc. – Bullish players picked up call options on the gold mining company today with shares of the Halifax, Nova Scotia-based firm climbing 1.2% to $6.77 in the final hour of the session. Investors expecting Gammon’s shares to extend gains purchased more than 3,000 calls at the January 2011 $7.0 strike for a premium of $0.43 apiece. Call buyers at this strike are poised to profit should shares in Gammon Gold surge 9.75% over the current price of $6.77 to surpass the effective breakeven point at $7.43 by January expiration. More than 3,280 calls changed hands at the Jan. 2011 $7.0 strike, which is more than six times the number of contracts represented by the 531 lots of previously existing open interest at that strike. Bullish sentiment spread to the March 2011 $7.5 strike where another 1,000 call options were purchased for premium of $0.48 each.…
Emerging Markets ETF Optimist Buys Ratio Call Spread
by Phil - June 1st, 2010 4:19 pm
Today’s tickers: EEM, PFE, XLF, DELL, NWL, QCOR, SHOO, EWZ, SLB, DOW & TEX
EEM – iShares MSCI Emerging Markets Index ETF – Contrarian options activity on the EEM, an exchange-traded fund designed to produce investment results that correspond to the price and yield performance of the MSCI Emerging Markets Index, points to optimism the fund’s shares may rebound sharply by July expiration. Shares of the emerging markets ETF are down 1.10% to stand at $37.68 just before 3:30 pm (ET). One bullish strategist positioning for a rally in the next couple of months purchased a ratio call spread on the fund. The investor picked up 3,000 calls at the July $38 strike for an average premium of $2.05 each, and sold 6,000 calls at the higher July $41 strike for a premium of $0.73 apiece. The net cost of the transaction amounts to $0.59 per contract. The trader responsible for the ratio spread makes money as long as shares of the EEM rally 2.41% to surpass the effective breakeven price of $38.59. Maximum available profits of $2.41 per contract pad the investor’s wallet if, by expiration, shares of the emerging markets fund rally 8.80% to $41.00. Shares of the EEM last traded at $41.00 back on May 4, 2010.
PFE – Pfizer, Inc. – Shares of the research-based global pharmaceutical company earlier rallied slightly to an intraday high of $15.42, but slipped lower in afternoon trading to stand 0.40% lower on the day at $15.17 as of 2:45 pm (ET). Bullish options activity took place on the stock despite the slight share price erosion suggesting one investor expects Pfizer’s shares to rebound sharply by September expiration. The optimistic individual purchased a debit call spread, picking up roughly 4,000 calls at the September $17 strike for an average premium of $0.30 each, and selling about the same number of calls at the higher September $19 strike for an average premium of $0.06 apiece. The investor paid a net $0.24 per contract to establish the spread. Pfizer’s shares must rally 13.65% over the current price of $15.17 in order for the investor to break even on the transaction at $17.24. Shares must surge 25.25% to exceed $19.00 before the trader accrues maximum available profits of $1.76 per contract.
XLF – Financial Select Sector SPDR – A put spread on the XLF, an exchange-traded fund designed to yield investment results that correspond…
Bearish Put Butterfly Spread Materializes on Emerging Markets Fund
by Option Review - March 10th, 2010 4:13 pm
Today’s tickers: EEM, GE, PXD, STI, VLO, UPS, RF, NWL, HNT & FFIV
EEM – iShares MSCI Emerging Markets Index ETF – A contrarian options trader established a large-volume bearish put butterfly spread in the June contract this afternoon even though shares of the emerging markets exchange-traded fund, which looks for investment results that correlate to the price and yield performance of the MSCI Emerging Markets index (an index designed by MSCI as an equity benchmark for international stock performance), are trading 0.65% higher to $41.47 as of 2:30 pm (ET). The massive pessimistic play yields maximum benefits to its owner if shares of the underlying stock plummet more than 15.50% from the current price to $35.00 by June expiration. The investor enacted the butterfly by purchasing 20,000 puts at the June $31 strike for a premium of $0.24 apiece [wing 1] in conjunction with the purchase of another 20,000 puts at the higher June $39 strike for $1.41 each [wing 2]. Finally, the body of the butterfly spread involved the sale of 40,000 puts at the central June $35 strike for a premium of $0.58 apiece. The net cost of the ‘fly amounts to just $0.49 per contract. Therefore, the bearish player is positioned to reel in maximum potential profits of $3.51 per contract – total net profits of $7.02 million – should shares of the underlying fund slip to $35.00 by expiration day. Shares of the EEM must surrender at least 7% of their current value by June expiration in order for the investor to breakeven at $38.51. The transaction is a very efficient way for this investor to establish a pessimistic stance on the emerging markets fund because maximum potential gains trump maximum possible losses on the position. The parameters of the butterfly spread represent a reward-to-risk ratio of more than 7-to-1.
GE – General Electric Co. – The diverse conglomerate’s shares are standing 0.30% higher on the day at $16.55 with one hour remaining in the trading session. General Electric’s shares have rebounded 6.30% in the past month since dipping to $15.57 on February 12, 2010, but one big options strategist is positioning for continued bullish momentum in the price of the underlying stock through expiration in May. The optimistic investor initiated a large-volume bullish risk reversal play by shedding 20,000 puts at the June $15 strike for an average premium of $0.37 apiece, spread against…
Analyst Upgrade Fuels Bullish Option Plays on Iron-Ore Giant Vale
by Option Review - January 19th, 2010 4:36 pm
Today’s tickers: VALE, MBT, FXI, NWL, CSE, VZ, XLV, CBY, HSY & SYMC
VALE – Vale S.A. – Shares of the world’s largest producer of iron-ore surged 2.75% in afternoon trading to stand at $31.18 after the firm received an upgrade to ‘overweight’ from ‘equal weight’ with a target share price of $39.00 at Barclays Capital. Indications of like-minded optimism are apparent in today’s option trading patterns on the stock. It looks like one investor initiated a put credit spread in the March contract. The bullish transaction involved the sale of 5,000 puts at the March $31 strike for a premium of $1.67 apiece, spread against the purchase of 5,000 puts at the lower March $28 strike for an average premium of $0.66 each. The credit spread results in a net credit of 1.01 per contract to the investor, who keeps the full premium received if VALE’s shares trade above $31.00 through expiration in March. The width of the spread indicates maximum potential losses on the trade of $1.99 per contract if shares of the iron-ore maker slump to $28.00 ahead of expiration.
MBT – Mobile Telesystems OJSC – The Russian provider of wireless communication services appeared on our ‘hot by options volume’ market scanner this afternoon due to near-term bullish options activity. Optimistic option plays fit neatly with the current 3.5% rally in shares of the underlying to $52.25 today. Traders sold 2,500 puts at the February $47.5 strike for a premium of $0.70 per contract, while the same number of calls were purchased at the higher February $55 strike for about $1.05 apiece. Another chunk of 2,500 puts were shed at the March $40 strike for approximately $0.33 each. All three transactions indicate bullish sentiment on Mobile Telesystems. If the trades are perhaps the work of one individual, the three-legged combination creates a clear directional play. In such a case, the investor will have paid a net $0.02 per contract for the calls by selling short the put options as described above. The long call stance positions the trader – in this example – to accrue profits if shares of MBT rally another 5.30% to surpass the effective breakeven price of $55.02 by expiration next month. We note that shares of the firm traded as high as $55.71 on October 21, 2009.
FXI – iShares FTSE/Xinhua China 25 Index Fund – Shares of the FXI, which invests assets…
Retail Reversal Combination Grabs Attention on XRT
by Option Review - November 4th, 2009 4:11 pm
Today’s tickers: XRT, MGM, DE, GLD, UUP, NWL, HNZ, EWZ, UNH, OSTK & STEC
XRT – SPDR S&P Retail ETF – A three-legged transaction in the December contract on the retail exchange-traded fund reveals bearish sentiment by one investor. Shares of the XRT are trading nearly 1% higher today to $34.60. It looks like the trader sold call options in order to offset the cost of buying a put spread. The put spread involved the purchase of 5,000 puts at the December 33 strike for a premium of 1.07 apiece, marked against the sale off 5,000 puts at the lower December 30 strike for approximately 37 cents each. The sale of 5,000 calls at the higher December 36 strike knocked another 87 cents per contract off the total price of the bearish play. The investor more than offset the cost of buying the spread and thus receives a net credit of 17 cents per contract. The full credit is retained by the trader as long as shares of the XRT remain below $36.00 through expiration. Additional profits may accumulate if shares dip below $33.00, while maximum potential gains of 3.00 per contract require that shares trade down to $30.00.
MGM – MGM Mirage, Inc. – Shares of the casino resort operator slipped 2.5% lower to $9.40 today but one options optimist initiated a bullish play on the stock in the March 2010 contract. It appears the trader put on a ratio call spread by buying one in-the-money call option for every three out-of-the-money calls sold. The investor purchased 10,000 calls at the deep in-the-money March 7.0 strike for 3.20 apiece and simultaneously sold 30,000 calls at the higher March 12 strike for 1.05 each. The net cost of the transaction is reduced to just one nickel per contract. The investor probably does not expect shares to rally through $12.00 by expiration because he is short 20,000 calls at that strike price in the March contract. Shares of MGM last traded above $12.00 on October 14, 2009.
DE – Deere & Co. – A large bearish butterfly spread appeared in the March 2010 contract on the agricultural equipment maker. The transaction indicates one investor is positioning for significant declines in the price of DE shares by expiration. Shares are down 1% to $46.76 with just under 90 minutes remaining in the trading day. The investor purchased the upper wing of the…
Sequenom takes a swan dive
by Option Review - April 30th, 2009 4:33 pm
Today’s tickers: SQNM, YHOO, XLY, XLI, GMCR, NWL, PFE & UBS
SQNM Sequenom, Inc. – Shares of the diagnostic testing and genetics analysis company have plummeted by more than 75%, crashing through the 52-week low for the stock of $6.19, to arrive at the current price of $3.68. The catastrophic decline stems from SQNM’s announcement that the launch of its SEQureDx test for Down syndrome is now delayed due to findings that employees of the company had mishandled crucial test data supporting the product’s validity. The news of the test’s delay does nothing to help the fact that the firm’s first-quarter loss widened to 29 cents per share, and Sequenom received a number of downgrades today including a rating of ‘underperform’ from ‘market perform’ by an analyst at Oppenheimer & Co. Option investors reacted to the bearish move on the stock by picking up 1,500 protective puts at June 2.5 strike price for an average premium of 41 cents apiece. In the near-term May contract, traders shed more than 4,200 calls at the May 5.0 strike for 39 cents each. Investors who were long put options at higher strikes were able to make a killing today by selling the protection. For example, it appears that one trader originally purchased about 3,500 puts for 2.00 apiece on April 1, 2009, and today sold the lots for 6.80 each. The profits garnered on such a trade amount to 4.80 per put option sold. On the flip side, investors who appear to have held a short put position at higher strikes were faced with deep in-the-money premiums. One investor who looks to have sold 3,500 puts at the May 12.5 strike for about 1.20 apiece back on April 1, 2009, today was forced to close out the short position by paying a premium of 9.00 each for the put options. This transaction results in a loss of 7.80. Option implied volatility on the stock sky-rocketed as high as 239% up from yesterday’s reading of 91%, but has since tapered off to the current value of 195.5%.
YHOO Yahoo! Inc. – The global internet brand has experienced a modest 1.5% rise in shares today to stand at $14.27. Options activity was slightly more bullish today with more than 3 call options traded to every put in play on the stock. Optimistic investors targeted the June contract where more than 11,100 calls were purchased…
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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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