Bearishness Detected In U.S. Bancorp Options
by Option Review - December 22nd, 2011 1:25 pm
Today’s tickers: USB, V, USG & CHS
USB - U.S. Bancorp – Financials extended gains Thursday and appear on track to wrap up the week on a positive note. Shares in U.S. Bancorp joined in on the rally to trade 1.75% higher at $27.28 as of 12:05 PM in New York, though its shares haven’t climbed quite like those of sector heavyweights Citigroup, JPMorgan and Bank of America today. Earlier in the week we noted a bearish transaction on USB in the Mar. 2012 contract that appeared to be the purchase of 10,000 $28 strike calls tied to the sale of 320,000 shares of the underlying. The position may be profitable if shares in U.S. Bancorp pull back ahead of expiration. Today, it looks like a different bearish strategy was initiated in USB call options. One trader sold 5,000 calls outright at June 2012 $32 strike within minutes of the opening bell this morning to pocket premium of $0.43 per contract. The investor responsible for the trade walks away with the full amount of premium in hand as long as shares in USB fail to rally above $32.00 at expiration day. If the trader holds no position in the underlying, he or she is naked short the call options and may start to lose money in the event that USB’s shares soar 18.9% in the first half of 2012 to exceed the effective upper breakeven price of $32.43 at June expiration. U.S. Bancorp reports fourth-quarter earnings on January 18, 2011.
V - Visa, Inc. – The near-term prospects for shares in Visa, which today rallied to a fresh high of $101.97, are good according to investors initiating bullish positions in options-land this morning. The global payments technology company’s call options are quite active, with more than 3.5 calls changing hands on the stock for each…
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DiggMonday Madness – G20 FinMins Set Two Week Deadline
by Phil - October 17th, 2011 8:01 am
Two weeks!
European leaders have two weeks to settle differences and flesh out a strategy to terminate their sovereign debt crisis as global finance chiefs warn failure to do so would endanger the world economy. “The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” Canadian Finance Minister Jim Flaherty said after the G-20 meeting on Saturday.
The Brussels meeting “has the potential to turn into a positive historic moment,” Joachim Fels, London-based chief economist at Morgan Stanley, wrote in a note to clients yesterday. “But it could also easily turn into a negative catalyst.”
Europe’s plan, which has still to be made public, includes writing down Greek bonds by as much as 50 percent, establishing a backstop for banks and magnifying the strength of the 440 billion-euro ($611 billion) temporary rescue fund known as the European Financial Stability Facility. “The plan has the right elements,” U.S. Treasury Secretary Timothy F. Geithner said in Paris. “They clearly have more work to do on the strategy and the details.”
The G-20 officials — who met to prepare for a Nov. 3-4 gathering of leaders in Cannes, France (and we’re fondly remembering London’s 2009 meeting with the graphic on the right) — said in a statement that the world economy faces “heightened tensions and significant downside risks.” European authorities must “decisively address the current challenges through a comprehensive plan.”
The policy makers held out the possibility of rewarding European action with more aid from the International Monetary Fund, while splitting over whether the Washington-based lender’s $390 billion war chest needs topping up. Europe’s latest strategy hinges on putting Greece, whose government forecasts its debt to reach 172 percent of gross domestic product in 2012, on a sustainable path. Austerity has plunged the country deeper into recession and provoked civil unrest that threatens political stability.
My reaction to this in Member Chat this Morning was to call for shorting the jacked up Dow Futures (/YM) at 11,600, saying:
Speaking of the illusion of power – yet another G20 meeting ends with yet another plan to have a plan but this time, for some insane reason, they only gave themselves a week to fix everything. I’ll be writing about this this morning but the gist of it is the Finance Ministers have essentially sent their own
…
Visa Calls Fly Off The Shelves As Shares Hit Fresh 52-Week Peak
by Option Review - September 20th, 2011 2:17 pm
Today’s tickers: V, CLGX, JEF & TEVA
V - Visa, Inc. – Volume in Visa call options jumped straight out of the gate this morning, with shares in the electronic payments company now trading 5.2% higher on the day at a new 52-week high of $94.75 as of 12:55 pm ET. The company said Monday it has partnered with Internet search giant, Google, to allow Visa account-holders to pay for store purchases with Android smartphones. Activity in call options that expire at the end of the week suggest some traders are positioning for the price of Visa’s shares to extend gains through Friday. Investors picked up in- and out-of-the-money calls in the Sept. ’23 weeklies, but focused their efforts most aggressively at the Sept. $95 call, driving volume at that strike up past 11,500 contracts. The majority of the Sept. $95 strike calls appear to have been purchased for an average premium of $0.46 each. Call buyers profit at expiration this week if shares in Visa exceed the average breakeven price of $95.46. Bullish bias in the weeklies spread to the Sept. $97.5 strike where investors paid an average premium of $0.22 apiece for more than 650 calls.
Longer-dated October contract call options are also popular on Visa this afternoon as traders position for fresh 52-week highs in the weeks ahead. Buyers out-transacted sellers in the Oct. $92.5 and $95 strike call, while mixed trading was seen in the higher Oct. $100 strike call option. Fresh prints in the Oct. $105 strike call are notable as upwards of 2,500 calls changed hands at that strike against previously existing open interest of just 3 contracts. It looks like most of these contracts were purchased for an average premium of $0.25 a-pop. Investors long the Oct. $105 strike call profit at…
Harley-Davidson Calls Pop as Bulls Position to Ride Rally Higher
by Option Review - July 1st, 2011 4:15 pm
Today’s tickers: HOG, V, CRI & ANR
HOG - Harley-Davidson, Inc. – Shares in Harley-Davidson roared to life during the month of June, rising some 20.0% since June 13. Bullish players expecting the price of the underlying to continue to accelerate to the upside scooped up call options this morning. HOG’s shares are currently up 1.75% on the day to stand at $41.69 as of 11:35 am ET. Call options in the front month are the most heavily trafficked, with the July $43 strike call attracting the greatest volume. Investors exchanged more than 4,100 calls at the July $43 strike against previously existing open interest of just 33 contracts. It looks like traders purchased most of the calls at that strike for an average premium of $0.36 a-pop. Call buyers profit if shares in the motorcycle manufacturer climb another 4.0% over the current price of $41.69 to surpass the average breakeven point at $43.36 by July expiration. Harley-Davidson’s shares traded within pennies of the breakeven price back in April when the stock rallied to a 2-year high of $43.15. The July contract calls expire four days before HOG reports second-quarter earnings. In-the-money calls set to expire in August received some attention, as well. It looks like some 2,100 calls may have been purchased for an average premium of $2.74 each at the August $40 strike. The calls changing hands at this strike could be closing positions as open interest at this strike is sufficient to cover volume generated thus far in the session. The rise in demand for HOG calls helped lift options implied volatility on the stock 7.4% to 32.23% by 11:50 am in New York.
V - Visa, Inc. – The run-up in Visa’s shares sparked by the Fed’s decision to impose a $0.22 cap on swipe fees rather…
Call Options Fly Off the Shelves at AIG
by Option Review - December 27th, 2010 4:23 pm
Today’s tickers: AIG, CAT, DTV, WPI, PBR, DNR, V & M
AIG - American International Group, Inc. – The insurer’s shares rallied as much as 12.2% today to touch an intraday- and new 2-year high of $60.96 on news the firm secured $4.3 billion in bank credit lines. Mounting confidence in the insurance company along with the rising value of AIG shares inspired bullish options traders to purchase in- and out-of-the-money calls today. Weeklies were popular with options traders expecting to see shares end the year on a high note. Investors picked up more than 2,900 now in-the-money calls at the December ’31 $57.5 strike for an average premium of $0.93 each, and coveted upwards of 2,900 in-the-money call options at the higher December ’31 $60 strike at an average premium of $0.51 a-pop. Optimistic individuals also purchased some 1,300 call options at the December ’31 $65 strike for an average premium of $0.27 apiece. Options strategists looked to the January 2011 contract to place bullish bets, as well. Notable in-the-money call buying was observed here, as well as fresh interest in calls at the January 2011 $62.5 strike where more than 1,700 contracts were purchased for an average premium of $1.46 each. The sharp increase in demand for American International Group calls pushed the overall reading of options implied volatility on the stock higher by 25.2% to 50.30% in the final 15 minutes of the trading day.
CAT - Caterpillar, Inc. – It looks like some options investors expect the machinery maker’s shares to trend higher at the start of 2011. CAT-bulls are buying call options in the January 2011 contract this afternoon despite the 0.45% decline in the price of the underlying stock to $94.04. Options traders exchanged more than 7,200 calls at the January 2011 $95 strike by 3:10pm in New York trade. It looks like the majority, or approximately 5,300 of the call options, were purchased for an average premium of $1.58 a-pop. Call buyers make money if CAT’s shares rally more…
Bearish Player Strangles Visa, Inc.
by Option Review - December 15th, 2010 4:06 pm
Today’s tickers: V, ABC, HTHT & DAL
V - Visa, Inc. – The credit card issuer and global electronic payment services provider popped up on our scanners this morning after one bearish options strategist sold a strangle in the January 2011 contract. It looks like the investor responsible for the transaction sees Visa’s shares slipping lower, while still trading within a certain range through expiration next month. Shares in Visa were down less than 1.25% around the time the strangle was put on, but have since plunged more than 4.00% to $77.39 as of 12:55pm in New York. As of midday, it looks like this trader’s directional play enhanced with the sale of a strangle, is now working in his favor. The strangle-strategist sold 2,100 calls at the January 2011 $85 strike for a premium of $1.02 each, and sold the same number of puts at the January 2011 $65 strike at a premium of $0.23 apiece. Gross premium pocketed on the transaction amounts to $1.25 per contract. The strangle was tied to the sale of 42,000 shares of the underlying stock at $79.60 each, which makes sense given the 0.20 delta on the calls. The investor keeps the full premium on the trade as long as shares trade within the boundaries of the strike prices described through January 2011 expiration. The short stance in shares is a sign this individual expects Visa’s shares to fall over the next several weeks, while the sale of the Jan. 2011 $65 strike puts indicates that he does not see shares collapsing more than 15% to a new 52-week low. As with any short strangle, the investor may absorb losses if shares move against him. Losses on the strangle start to accumulate if Visa’s shares rally above the upper breakeven price of $86.25, or should shares slip beneath the lower breakeven point at $63.75, ahead of January expiration day. In hindsight, the strangle was nicely timed. Selling the same Jan. 2011 $65/$85 strangle now yields gross premium of $0.95 per contract versus the far richer $1.25 per contract enjoyed by this early-bird investor.…
Contrarian Player Plants Bull Call Spread on Seed Maker Monsanto Co.
by Option Review - September 29th, 2010 6:23 pm
Today’s tickers: MON, EWZ, XLB, HPQ, V, BCSI & SLB
MON - Monsanto Co. – Shares of the maker of genetically modified seeds seemed to be recovering at the start of the current session following Tuesday’s horrendous performance wherein the stock fell as much as 9.80% from an intraday high of $52.64 to a low of $47.50. MON’s shares managed to rebound 4.50% off Tuesday’s low of $47.50 to briefly touch an intraday high of $49.62, although the rally proved to be short-lived and shares are down 1.00% at $48.25 as of 3:15 pm ET. Though MON was unable to keep hold of earlier gains, one contrarian player is optimistic that Monsanto’s shares will reverse course and head back up by November expiration. The investor purchased a call spread, buying 5,000 calls at the November $55 strike at a premium of $0.85 each, and selling the same number of calls at the higher November $60 strike for a premium of $0.27 apiece. Net premium paid to establish the transaction amounts to $0.58 per contract. Thus, the investor is ready to make money should Monsanto’s shares surge 15.20% over the current price of $48.25 to surpass the effective breakeven point on the spread at $55.58 by November expiration. Maximum potential profits of $4.42 per contract are available to the bullish player if MON’s shares jump 24.35% to trade above $60.00 by expiration day.
EWZ - iShares MSCI Brazil Index ETF – Investors are placing near-term bearish bets on the Brazil fund this afternoon by selling calls to finance the purchase of put spreads in the October contract. The large pessimistic plays could be the work of traders hedging long positions or the mark of outright bearish bettors expecting the price of the underlying fund to slip lower ahead of expiration next month. Shares of the EWZ, an exchange-traded fund designed to replicate the price and yield performance of publicly traded securities in the aggregate in the Brazilian market – as measured by the MSCI Brazil Index, rallied…
Contrarian Player Sees Visa Recovery Story Unfolding by Jan. 2012
by Option Review - September 13th, 2010 8:09 pm
Today’s tickers: V, EMC, MON, SAY, MJN, ADM, BBY, EDMC, EBAY & CHS
V – Visa, Inc. – Shares of the global payments company plunged 4.7% this afternoon to an intraday and new 52-week low of $64.90 following reports that said federal caps and pending litigation may limit Visa’s ability to increase prices. The price of the underlying was also helped lower by a downgrade to ‘market perform’ from ‘outperform’ at Sanford Bernstein, where analysts have a 12-month target price of $77.00 a share on the stock. The sharp decline in the price of the credit card issuer’s shares inspired near-term bearish options trading. More interesting, however, were the contrarian players seen initiating bullish positions in the longer-dated January 2012 contract. One optimistic strategist enacted a three-legged bullish combination play to position for a rebound in Visa’s shares. The investor appears to have sold roughly 2,500 puts at the January 2012 $50 strike for premium of $4.39 each, purchased about the same number of January 2012 $70 strike calls at an average premium of $8.37 a-pop, and sold approximately 2,500 calls at the higher January 2012 $90 strike for a premium of $2.50 apiece. The average net cost of the transaction reduces to $1.48 per contract. Thus, the contrarian player stands ready to make money should Visa’s shares jump 10.1% over today’s low of $64.90 to exceed the average breakeven price of $71.48 by expiration day. Maximum potential profits of $18.52 per contract are available to the investor should shares surge 38.7% to trade above $90.00 by January 2012 expiration. Visa’s shares last traded above $90.00 back on May 4, 2010. Options implied volatility on Visa, Inc. is up 10.8% at 33.75% with just over 20 minutes remaining ahead of the closing bell.
EMC – EMC Corp. – A large chunk of call options were purchased on EMC Corp. in early afternoon trading, however, it looks like the investor responsible for the transaction is taking a bearish stance on the stock rather than a bullish one. EMC’s shares rallied as much as 2.25% in the first half of the trading day to reach an intraday high of $20.43. The current 52-week high on the stock is $20.97, attained back on August 4, 2010. At first glance, the purchase of 20,000 calls at the January 2011 $21 strike at a premium of $1.00 each looks like a bullish bet by an…
Visa, Inc. Call Options Fly Off the Shelves
by Option Review - June 21st, 2010 4:34 pm
Today’s tickers: V, AXP, GIS, HNZ, AFFY, REV, AA & ORCL
V – Visa, Inc. – Frenzied call buying ensued on global payments network, Visa, Inc., this afternoon with the price of the underlying shares rallying as much as 8.76% to secure an intraday high of $83.79. Visa’s shares are currently up a more modest 4.90% to stand at $80.82 as of 3:10 pm (ET). The sharp rally in Visa’s share price likely stems from news that U.S. politicians reached an agreement on the regulation of interchange/”swipe” fees on credit and debit card transactions. Investors flooded the near-term July contract on Visa, Inc. to initiate bullish stances on the stock. Options traders expecting continued upward movement in the price of Visa’s shares by July expiration picked up approximately 6,800 calls at the July $85 strike for an average premium of $1.41 each. Investors long the July $85 strike calls make money only if shares of the underlying stock trade above $86.41 ahead of expiration day next month. Buying interest spread to the higher July $90 strike where some 4,300 calls were purchased at an average premium of $0.46 each. Call buyers at this strike price accrue profits if the firm’s shares surge 11.9% from the current price of $80.82 to trade above the average breakeven point to the upside at $90.46 by July expiration day. Finally, investors honed in on the July $95 strike to take ownership of 1,300 calls for an average premium of $0.19 per contract. Options players populating Visa, Inc. this afternoon displayed a clear preference for bullish calls on the stock by exchanging more than 2.3 call options to each single put contract in play thus far in the session. But, some optimistic individuals utilized puts to take a near-term bullish stance on Visa. Investors sold at least 1,400 puts at the July $80 strike to receive an average premium of $2.81 per contract. Put sellers keep the full premium pocketed on the transaction as long as Visa’s shares exceed $80.00 through expiration day next month. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $77.19 each in the event the puts land in-the-money at expiration.
AXP – American Express Co. – The global payments company appeared on our ‘most active by options volume’ market scanner this afternoon after one options strategist initiated…
Options Strategist Portends Big Rebound at Anadarko by Jan. 2011 Expiration
by Option Review - June 17th, 2010 4:24 pm
Today’s tickers: APC, FSLR, SFY, V, XRT, NFLX, DV, MTB, SWY & SNE
APC – Anadarko Petroleum Corp. – Trading in longer-dated call options on Anadarko Petroleum this afternoon indicates one options strategist is expecting shares of the independent oil and gas exploration and production company to rebound significantly by expiration in January 2011. APC’s shares rallied 1.5% at the start of the trading session to reach an intraday high of $43.70. However, as the day progressed, shares lost momentum and are currently down 3.90% on the day at $41.38 with 45 minutes remaining before the closing bell. The long-term bullish player appears to have enacted a ratio call spread, buying 2,000 in-the-money calls at the January 2011 $40 strike for a hefty premium of $10.30 apiece, and selling 4,000 calls at the higher January 2011 $55 strike for a premium of $3.60 each. The net cost of the spread amounts to $3.10 per contract. Therefore, the trader is poised to profit should shares of the underlying stock rebound 4.15% to surpass the effective breakeven price of $43.10 by January expiration. The investor stands ready to accrue maximum potential profits of $11.90 per contract in the event that APC’s shares surge 32.9% from the current price of $41.38 to settle at $55.00 by expiration day.
FSLR – First Solar, Inc. – Bullish options players dominated activity on the manufacturer of photovoltaic solar power systems today with shares of the underlying stock rallying sharply by as much as 5.98% this morning to an intraday high of $125.88, the highest the stock has been in one month. The maker of solar modules was raised to ‘outperform’ from ‘neutral’ at Credit Suisse today where analysts upped their target price on the stock to $150.00 from $110.20. First Solar’s shares tapered off by late afternoon to stand 3.50% higher on the day at $122.93 just before 3:30 pm (ET). Investors positioning for continued upward movement in FSLR’s shares by June expiration purchased at least 1,300 calls at the June $125 strike for an average premium of $1.72 apiece. Call buyers at this strike price make money only if shares of the underlying stock trade above the average breakeven price of $126.72 by expiration tomorrow. Buying interest spread to the higher June $130 strike where roughly 1,100 call options were purchased for an average premium of $0.42 per contract. First Solar’s share price would need…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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