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Saturday, April 20, 2024

Sequenom takes a swan dive

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 at the June 15 strike price for about 1.01 apiece. Even more bullish individuals bought some 2,800 calls at the higher June 16 strike for an average premium of 70 cents per contract. Shares will need to climb by 12% to a breakeven price of $16.01 for investors of the June 15 calls to begin to amass profits by expiration, while those long of June 16 calls will need shares to increase by 17% to surpass the breakeven point at $16.70. Option implied volatility has steadily climbed to the current reading of 61% up from 55% recorded at the start of the trading day.

XLY Consumer Discretionary Select Sector SPDR – Shares of the consumer discretionary ETF have increased by more than 2% to $23.44. While yesterday’s options activity on the fund was decidedly bearish, today’s picture – while still bearish – yielded a mixture of trades. Put buying continued today as traders picked up more than 11,200 puts at the May 23 strike price for 65 cents apiece, and an additional 17,200 puts at the June 19 strike for an average premium of 34 cents per contract. In contrast to the downside protection sought be some traders, other looked to take bullish stances on the ETF. The June 26 strike price had more than 1,200 calls purchased for 47 cents each while the September 24 strike price had some 5,000 calls picked up for 2.10 apiece.

XLI Industrials Select Sector SPDR – Shares have risen by about 1% to $21.90. Option traders today, as seen with the XLY, have continued to emit an overall bearish tone on the fund. However, some bullish investors have joined the XLI arena by enacting contrarian trades. Yesterday’s put buying trend spread to the June 18 strike price today where more than 17,400 puts were purchased for 30 cents apiece. On the flip side, investors got long of calls at the June 22 strike price where 10,000 lots were scooped up for 1.35 each. Shares need only rise by another 4% from the current share price in order for the June 22 calls to land in-the-money by expiration. Finally, more optimistic traders reached as high as the June 25 strike price where 3,000 calls were coveted for an average premium of 30 cents per contract.

GMCR Green Mountain Coffee Roasters, Inc. – Shares of the specialty coffee company and provider of the Keurig gourmet single-cup brewing system have exploded upwards by 42% to $75.00, discarding the old 52-week high of $56.77 for the stock with the used grinds. The company reported a 117% rise in earnings for the second-quarter to arrive at 50 cents per share amid a 60% increase in sales due to the expansion of its Keurig products. The bullish bonanza for GMCR is heightened by the relationship it has forged with Wal-Mart (WMT) stores which will carry the Keurig brewers and K-cups in more than 3,000 of its stores. Option traders looking to get bullish on the stock had little to work with as the highest strike price offered for GMCR is $70.00. However, there was fresh interest built up at the June 70 strike price where more than 2,000 call options traded hands for about $9.10 apiece. The near-term May contract attracted put buyers and sellers at the May 65 strike price where more than 4,000 puts were exchanged for an average premium of 2.00. GMCR expects business to continue booming and has increased its earnings estimate for fiscal year 2009 to $1.47 from $1.25 per share.

NWL Newell Rubbermaid Inc. – The consumer and commercial products company has experienced a huge rise in shares of more than 24.5% to $10.80 after it reported first-quarter profits that exceeded analyst expectations. NWL earned 20 cents per share, trumping average estimates for the firm of about 8 cents. Option traders were seen banking gains on the share price rally by selling 2,000 in-the-money calls at the June 7.5 strike price for 3.24 apiece as well as 6,400 in-the-money calls at the June 10 strike for an average premium of 1.32 each. Investors looking to get bullish on the stock selected the June 12.5 strike price where more than 6,700 calls were purchased for 39 cents per contract. Shares would need to continue to rise by 19% to the breakeven point at $12.89 in order for traders to profit by expiration. Option implied volatility has come way off since earnings were announced from 76% yesterday to the current value of 61%.

PFE Pfizer, Inc. – The pharmaceutical company’s shares have edged up by about 1% to stand at $13.60 amid gains observed across a number of its competitors today. PFE jumped higher on our ‘most active by options volume’ market scanner after a few large volume transactions in the January 2010 and 2011 contracts. It appears that a couple of investors are looking for longer-term bullish moves on the stock as traders bought 10,000 calls at the January 2010 17.5 strike price for about 45 cents per contract. Bullishness spread to the following year’s January 2011 contract where it appears that the another optimistic trader initiated the sale of 25,000 puts at the January 7.5 strike price for 47 cents each which appears to have partially funded a bull call spread in the same month. The spread was established by purchasing 25,000 calls at the January 15 strike for 1.83 each against the sale of 25,000 puts at the higher January 20 strike price for a premium of 70 cents. The net cost of the spread was reduced to 66 cents and yields a maximum potential profit of 4.34 if shares can rally up to $20.00 by expiration in two years time.

UBS UBS AG – The global financial services firm has experienced a more than 5.5% increase in shares to $13.85. In the midst of the rally, option investors acted cautiously on the stock by delving into protective put positions in the June and September contracts. At the nearer-term June 14 strike price 2,500 puts were purchased for 1.40 apiece and spread against the sale of 2,500 puts at the June 12.5 strike for a premium of 80 cents each. The net cost of the spread amounts to 60 cents and yields a maximum profit of 1.90 if shares were to decline to $12.50 by expiration. Further along in the September contract, another investor selected the same strike prices to initiate a larger-volume put spread. The September 14 strike saw 10,000 puts purchased for 2.25 each spread against the sale of 10,000 puts at the September 12.5 strike for 1.60 per contract. The net cost of the bearish position amounts to 65 cents and yields a maximum gain of 1.85 to the investor if shares decline to $12.50 by expiration in September. Yesterday there was a similar build in bearish put volume of around 10,000 lots at the September 12.5 strike. Today an investor has chosen to use spread combinations more efficiently in getting bearish.


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