Werner Enterprises Sees Bearish Activity
by Andrew Wilkinson - October 22nd, 2009 4:35 pm
Today’s tickers: WERN, MDVN, GT, XRX, SLE, AMGN, ESI, EBAY, FFIV & SLE
WERN - Werner Enterprises, Inc. – The truckload freight services firm edged onto our ‘hot by options volume’ market scanner due to bearish trading in the June contract. Shares of WERN slipped 0.5% lower this afternoon to $20.22. One investor initiated a ratio put spread by purchasing 6,000 put options at the June 20 strike for 2.25 apiece, and by simultaneously selling 12,000 puts at the lower June 17.5 strike for 1.10 each. The net cost of the trade is reduced to just one nickel per contract. The trader is probably aiming to protect the value of a long position in shares of WERN through expiration. Downside protection will kick in if shares decline more than 27 cents from the current price given the effective breakeven point on the trade at $19.95.
MDVN - Medivation, Inc. – Long-term bearish activity in the June 2010 contract suggests one investor may be bulking up on downside protection in case shares of biopharmaceutical company, Medivation, Inc., continue to decline. The stock is currently trading less than 0.5% lower to stand at $26.51. A put spread was established through the purchase of 10,000 puts at the June 22.5 strike for 7.80 apiece, marked against the sale of 10,000 puts at the lower June 12.5 strike for 1.87 each. The net cost of the pessimistic play amounts to 5.93 per contract. The spread was most likely initiated by an investor holding a long position in the underlying shares. Putting on the protective stance shields the investor from losses beneath the breakeven point at $16.57. However, if the trader is in fact long the stock, he will suffer a 38% decline in the value of MDVN before downside protection kicks in at the breakeven price described. An alternate scenario is that the investor does not hold a long position in MDVN. If this is the case, the trader is uber-bearish and expects to garner profits from significant declines in Medivation through expiration in June.
GT - The Goodyear Tire & Rubber Co. – Option traders populated the November contract on GT with bullish plays this afternoon. Shares added more than 2.5% during the session to arrive at the current price of $17.83. Some investors targeted the now in-the-money November 17.5 strike to purchase 3,800 calls for an average premium of one dollar apiece. Other traders looked to the higher…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Sara Lee Tempts Call Buyers
by Andrew Wilkinson - September 18th, 2009 4:35 pm
Today’s tickers: SLE, TPX, ODP, AUY & BAC
SLE - Cake baker, Sara Lee, attracted bullish investors to the January contract this morning amid a 3% rally in the price of shares to $10.40. Traders thirsting for a rally in SLE by the start of 2010 purchased more than 8,000 calls at the January 12.5 strike for an average premium of 21 cents apiece. Investors holding the calls are now positioned to accumulate profits if shares of Sara Lee surge 22% higher to breach the breakeven price of $12.71 by expiration. We note that SLE has not traded higher than $12.71 since October 6, 2008. – Sara Lee Corp. –
TPX - The manufacturer of luxurious mattresses experienced a 1% decline in shares to $18.04 today despite having received an upgrade to ‘outperform’ from ‘neutral’ and a 12-month price target of $23.00 at Wedbush Morgan Securities. Investors employed two different strategies using options in the October contract. One tactic observed was a bullish risk reversal. The trader shed 1,000 puts at the October 17.5 strike for an average premium of 97 cents in order to partially finance the purchase of 1,000 in-the-money calls at the same strike for 1.85 apiece. The net cost of the reversal amounts to 88 cents per contract. The bullish trader stands ready to breakeven on the transaction if shares can breach the breakeven point at $18.38 by expiration next month. Another investor targeted the same strike to implement a short straddle. This individual sold 2,000 puts for 75 cents each and 2,000 calls for 1.80 per contract at the October 17.5 strike to pocket a gross premium of 2.55. The short straddle indicates that the trader expects shares of TPX to settle at $17.50 by October expiration. If the stock moves 54 cents lower to $17.50, the investor will keep the entire 2.55 premium received on the sale. Otherwise, greater volatility in the price of TPX could result in losses if shares shift outside of the breakeven point to the upside at $20.05, or beneath the breakeven to the downside at $14.95. – Tempur-Pedic International, Inc. –
ODP - Shares of the global supplier of office products slumped 8% lower at the start of the session to $5.86. The stock recovered somewhat by 11:30 am (EDT) with shares down 4% to $6.12. Some investors braced for continued declines in ODP by initiating put spreads in the October contract. It looks…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
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
(