Bears Tackle Exxon Mobil Options, Bulls Climb Aboard Carnival Corp.
by Option Review - June 21st, 2011 4:04 pm
Today’s tickers: XOM, CCL, WYN & VRSN
XOM - Exxon Mobil Corp. – A large bearish options play on the world’s largest corporation indicates one strategist is positioned for shares in Exxon Mobil to fall ahead of August expiration. The investor responsible for the sizable ratio put spread on the oil and gas company may be taking an outright bearish stance on the stock, or could be hedging a long position in the underlying ahead of XOM’s July 28 second-quarter earnings report. Exxon Mobil’s shares are currently up 1.3% to stand at $80.75 just before 11:45am in New York. It looks like the options trader picked up 7,500 puts at the August $77.5 strike for a premium of $1.79 each, and sold 15,000 puts at the lower August $72.5 strike at a premium of $0.78 apiece. The net cost of the ratio spread reduces to $0.23 per contract, thus positioning the investor to profit if shares in XOM decline 4.3% in the next couple of months to breach the effective breakeven price of $77.27 at expiration. Maximum potential profits of $4.77 per contract are available to the trader should shares plunge 10.2% to settle at $72.50 at expiration in August. The ratio of twice as many short puts suggests the investor sees limited bearish movement in the price of the underlying stock. More significant share price erosion than the put player expects could result in losses on the position in the event that shares in Exxon Mobil drop 16.1% in the next nine weeks to slip beneath the lower breakeven price of $67.73 by expiration day in August. Other signs of investor pessimism on XOM cropped up in the August $85 strike call where is appears some 2,600 contracts sold for an average premium of $0.70 a-pop. Options implied volatility on the stock is off its lows of the session, but remains 8.5% lower on the day at 18.73% as of 11:55am.…
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DiggInvestors Bumps Up Bullish Stance on Ford Motor Co.
by Option Review - August 2nd, 2010 4:13 pm
Today’s tickers: F, GNW, VRSN & OCR
F – Ford Motor Co. – A massive bullish transaction involving 300,000 call options on the auto manufacturer today indicates one big player is increasingly optimistic that Ford’s shares are likely to stay their upward trajectory through September expiration. The price of the auto maker’s shares rallied 2.90% to $13.14 by 12:30 pm ET on news Chinese automaker, Zhejiang Geely Holding Group Co., completed its purchase of Volvo Cars from Ford by shelling out $1.3 billion in cash and issuing a $200 million note for the acquisition. Ford’s credit rating was also raised two levels by Standard & Poor’s today on optimism the firm will remain profitable, and due to improved investor and consumer perception of the Dearborn, MI-based company. The enormous bullish trade on Ford appears to be the work of an investor booking profits by first selling a previously established long call position, and next initiating a fresh more-bullish stance on the stock. It appears the investor originally purchased 150,000 calls at the September $12 strike for an average premium of $0.41 each back on July 9, 2010, when Ford’s shares closed at $10.85. The subsequent rally in the price of the underlying stock boosted premium on the September $12 strike calls, allowing the trader to sell all 150,000 now in-the-money contracts at an average premium of $1.40 apiece. Net profits on the sale of the call options amounts to $0.99 per contract. Next the investor purchased 150,000 fresh in-the-money calls at the September $13 strike for an average premium of $0.75 per contract. Profits start to accumulate on the new position if Ford’s shares rally another 4.65% over the current price of $13.14 to surpass the effective breakeven point to the upside at $13.75 by expiration day next month.
GNW – Genworth Financial, Inc. – A three-legged bullish options combination play initiated on the insurance company today suggests one strategist expects Genworth’s shares to rally significantly ahead of expiration day in December. GNW’s shares inched up during morning trading, but later slipped 0.30% lower to stand at $13.54 by 12:50 pm ET. The investor appears to have sold put options in order to offset the cost of buying a debit call spread. To establish the spread the trader sold 4,000 puts at the December $12 strike for an average premium of $1.04 each, purchased 4,000 calls at the December…
Strangle Strategist Targets VeriSign Options
by Option Review - May 20th, 2010 5:47 pm
Today’s tickers: VRSN, CAT, EWZ & XCO
VRSN – VeriSign, Inc. – Symantec Corp. agreed to shell out $1.28 billion in cash to purchase VeriSign Inc.’s authentication services unit in a deal reportedly set to close by the end of September. Despite securing a buyer for its unit, which certifies that websites are legitimate and safe for online transactions, VeriSign’s shares are lower by 1.75% to stand at $27.50 as of 11:20 am (ET). VeriSign received an upgrade to ‘buy’ from ‘hold’ at Deutsche Bank today where analysts tout a 12-month target share price of $35.00 on the stock. One options strategist expecting shares of the underlying stock to remain range-bound through September expiration sold a strangle to reap the benefits of inflated options implied volatility. The investor sold 10,300 calls at the September $31 strike for a premium of $1.00 each and sold the same number of puts at the lower September $28 strike for $2.85 apiece. Gross premium pocketed on the transaction amounts to $3.85 per contract. The trader keeps the full premium received on the sale as long as shares trade within the range of the strike prices described through expiration. The short sale of both call and put options expose the investor to potential losses should shares rally above the upper breakeven price of $34.85, or if shares slip beneath the lower breakeven point at $24.15, ahead of expiration. Another investor opted to take profits off the table by selling a previously established long call position in the September contract. Perhaps the trader is taking in whatever profits are available now in case shares continue lower ahead of expiration. It looks like the investor originally purchased at least 15,000 calls at the September $28 strike for an average premium of $1.45 apiece back on April 15, 2010, when shares were trading at a volume-weighted average premium of $26.84. Today the options trader sold 15,000 calls at that strike for a premium of $2.15 each, receiving net profits of $0.70 per contract. In hindsight the investor could have raked in more substantial gains had he sold the calls yesterday when VeriSign’s shares surged to a 52-week high of $29.23 on the news Symantec Corp. agreed to buy out the authentication services unit at VRSN.
CAT – Caterpillar, Inc. – Options activity on the machinery manufacturer casts a glimmer of optimism on the stock despite the 4.45% decline…
Fortune Brands’ Shares Trade at New 52-Week High, Bullish Players Covet Call Options
by Option Review - March 15th, 2010 4:10 pm
Today’s tickers: FO, STJ, XLB, BSX, BIDU, VRSN & MNKD
FO – Fortune Brands, Inc. – Shares of the holding company with subsidiaries such as Beam Global Spirits & Wine, Inc., which manufactures Jim Beam whiskey and Maker’s Mark, and Acushnet Company, the producer of Titleist golf products, rallied 2.35% during the session to reach a new 52-week high of $48.45. The increase in Fortune’s share price inspired bullish options trading on the stock today. Approximately 1,000 calls were picked up at the April $50 strike for an average premium of $0.66 apiece. But, the real action took place at the June $50 strike where nearly 15,500 calls were purchased for an average premium of $1.68 per contract. Investors holding the June $50 strike call options stand ready to amass profits only if Fortune Brands’ shares rally another 6.65% from the current day’s price to breach the breakeven point on the calls at $51.68 by expiration day in June.
STJ – St. Jude Medical, Inc. – The manufacturer of cardiovascular medical devices experienced a sharp 8.45% rally in its share price today to $40.67 on news its rival, Boston Scientific Corp., suspended sales of its implantable heart defibrillator this morning. Options players initiated bullish transactions on the stock by selling 2,100 puts at the March $40 strike for an average premium of $0.60 apiece. Put-sellers keep the $0.60 premium per contract as long as St. Jude’s shares trade above $40.00 through expiration on Friday. However, put-players are obliged to have shares of the underlying stock put to them at an effective price of $39.40 each should the put options land in-the-money at expiration. Optimistic investors scooped up 3,100 call options at the July $45 strike by paying an average premium of $0.77 per contract. Call-coveters are positioned to profit only if shares rally another 12.5% from the current price to breach the breakeven share price at $45.77 by expiration day in July.
XLB – Materials Select Sector SPDR – Shares of the XLB, an exchange-traded fund that tracks the performance of the materials economic sector of the S&P Composite Stock Index, declined 0.30% today to $33.19. Trading in long-dated options on the fund, however, suggests one individual is bullish on the sector through expiration in January 2011. It appears the investor sold 10,000 put options outright at the January 2011 $27 strike for a premium of $1.32 per contract. The…
Option Players Construct Conflicting Strategies on EBAY
by Option Review - March 5th, 2010 4:09 pm
Today’s tickers: EBAY, RCL, RAI, VLO, VRSN, USU, JAS, NUAN, TIVO & DNR
EBAY – eBay, Inc. – Two different options strategies employed on online auction-house, eBay, Inc., today indicate conflicting medium-term sentiment on the stock. One trader is positioning for a significant rally in the price of the underlying, while another individual anticipates shares will remain range-bound through July expiration. EBAY’s shares increased 3.35% during the current session to stand at $24.58. The uber-bullish stance taken on the stock involved the purchase of 10,000 call options at the July $30 strike for a premium of $0.22 per contract. The investor holding the calls stands ready to amass profits should shares of the underlying stock surge 22.95% from the current price to surpass the effective breakeven point on the calls at $30.22 by expiration in five months time. In contrast, the other options player initiated a sold strangle, which yields maximum benefits only if shares trade within a specified range through expiration. The investor sold 3,500 calls at the July $26 strike for a premium of $1.10 apiece in combination with the sale of the same number of puts at the lower July $21 strike for a premium of $0.58 each. Gross premium enjoyed on the trade amounts to $1.68 per contract. The investor keeps the full amount of premium if shares trade between $21.00 and $26.00 through expiration. However, losses accrue on the position if EBAY’s shares trade above the upper breakeven point at $27.68, or if shares slip beneath the lower breakeven price of $19.32 by expiration day. If the call-buying optimist ends up accurately predicting EBAY’s future share movements, the strangle seller will lose out big time. But, if shares do remain range-bound, the call-buyer only ever risks losing $0.22 per contract, or the price paid to take ownership of the call contracts.
RCL – Royal Caribbean Cruises Ltd. – The cruise operator received an upgrade to ‘neutral’ from ‘sell’ with a target share price of $27.00 at Goldman Sachs Group yesterday, and today nearly reached the target price amid a 2.60% rally in the price of the underlying shares to $29.70. Option trading in the June contract today is likely the work of a bullish trader investing in married put options. It appears the investor purchased shares of the underlying stock for about $29.36 apiece in conjunction with the purchase of approximately 39,000 puts at the…
Joy Global Calls Active
by Option Review - September 15th, 2009 4:11 pm
Today’s tickers: JOYG, VRSN, GE, DAL, TER, SCHW & KR
JOYG - The mining equipment manufacturer has enjoyed a more than 2.5% increase in shares during today’s session to stand at $44.40. Investors hoping for continued bullish momentum for the stock busied themselves with buying up call options in the September contract. It looks like nearly 8,000 call options were coveted for an average premium of 85 cents apiece at the now in-the-money September 44 strike. Investors holding the calls have the right to take delivery of the stock at $44.00, but they will not realize profits unless shares of JOYG climb through the breakeven point at $44.85 by expiration on Friday. – Joy Global, Inc. –
VRSN - Internet infrastructure services provider, VeriSign, jumped onto our ‘most active by options volume’ market scanner today after 25,000 call options were traded by one investor targeting the December contract. Shares of VRSN are currently trading flat on the day at $22.46. The chunk of 25,000 calls were traded at the out-of-the-money December 25 strike for an average premium of 87 cents per contract. It appears that the calls were tied to shares of the underlying stock. It could be the case that the investor is taking a bullish stance on VRSN by initiating a covered call. If this is the case, the trader purchased shares of the underlying and simultaneously shed call options. This strategy would partially offset the cost of getting long the stock by the amount of premium received and establish an effective exit strategy. The covered call reduces the price paid per share to about $21.59 and positions the trader to attain maximum potential gains of 3.41 – or 16% – in the event that the stock rallies higher than $25.00 by expiration. Shares would be called from him by expiration day if the calls were to land in-the-money. Another possible motivation for the call transaction is that the investor is decidedly bearish on VeriSign. If this is the case, the trader sold the stock short because he believes the stock will fall, and then bought calls as an effective stop-loss strategy. If the stock should rally by expiration rather than decline, the trader can purchase the shares for $25.00 each to cover his short position and cap potential losses. – VeriSign, Inc. –
GE - As its shares rally, option traders are increasingly attracted to bullish call options on…
Brazilian ETF recoil has option traders on defensive
by Option Review - May 11th, 2009 4:41 pm
Today’s tickers: EWZ, VRSN, PFE, MSFT, Q, FXI & NSM
EWZ iShares MSCI Brazil Index ETF – Shares of the Brazil ETF have dipped by less than 1% to stand at $50.93 today. The ticker occupied prime real estate on our ‘most active by options volume’ market scanner after a large volume ratio put spread was established in the September contract. An investor looking for bearish movement on the stock purchased 15,000 puts at the September 40 strike price for a premium of 2.30 apiece spread against the sale of 30,000 puts at the September 30 strike for about 60 cents each. The net cost of the trade amounts to 1.10 and yields a maximum potential profit of 8.90 to the investor if shares were to fall all the way to $30.00 by expiration. Before the position comes good, Brazilian shares would need to decline by 23%. The trader begins to amass profits beginning at the breakeven point at $38.90.
VRSN VeriSign, Inc. – The provider of internet infrastructure services has experienced a share price rise of about 1% today to $24.48. VRSN appeared on our ‘hot by options volume’ market scanner after one investor established a large-volume ratio put spread in the September contract. Likely looking for downside protection on a long stock position, this trader purchased 25,000 puts at the September 25 strike price for 2.90 apiece and sold 50,000 puts at the lower September 20 strike for a premium of 95 cents per contract. The net cost of the transaction amounts to 1.00 to the investor and yields maximum potential gains to the downside of 4.00 should shares fall to $20.00 by expiration. The ratio spread represents some 80,000 contracts in play, trumping the existing open interest on the stock of just 64,919 lots.
PFE Pfizer, Inc. – The pharmaceuticals giant has slipped by more than 1.5% to $14.15 today, but attracted one bullish investor to populate the January 2011 contract. The January 15 strike price saw 50,000 calls picked up by one individual for a premium of 2.16 apiece. The long-call position requires that shares breach the breakeven point at $17.16 by expiration in order for the investor to begin to amass profits. The contracts have more than one and a half years until expiration and require that shares rally by at least 21% during that time period.
MSFT Microsoft Corp. – We know not why…
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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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