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New York
Monday, February 6, 2023


UPS Put Action

Today’s tickers: UPS, BBY, MBI, XLF, HIG, MOS & ASML

UPS United Parcel Service, Inc. – The package delivery company, which delivers an average of more than 14.7 million pieces per day around the globe, has experienced a share price decline of more than 2.5% to $54.35. UPS appeared near the top of our ‘most active by options volume’ market scanner this afternoon after one investor traded massive chunks of put options on the stock. The trader looks to be extending downside protection by establishing a multi-leg calendar spread. The now in-the-money May 55 strike price saw the sale of 36,000 puts for a premium of 1.85 apiece spread against two purchases. The first 20,000 puts were picked up at the June 55 strike price for a premium of 3.40 each while the second chunk of 20,000 put options were bought at the July 55 strike price at a cost of 4.10 to the trader. All three legs of the trade were enacted simultaneously and protect the investor – who is likely long the stock – from downward movements in the share price over the next couple of months. Other noteworthy activity on UPS occurred at the June 60 strike price where bullish individuals purchased 3,700 calls for an average premium of 45 cents apiece. Shares would need to rally by 11% from the current price and breach the breakeven point at $60.45 in order for bulls to profit on the June 60 calls by expiration.

BBY Best Buy Company, Inc. – Shares of the specialty retailer have suffered a decline of more than 3.5% to $36.75. We observed option traders taking a bearish stance on the stock today, particularly in the June contract. The June 35 strike price had traders stocking up on downside protection as some 9,000 puts were coveted for an average premium of 1.96 apiece. An additional 1,750 put options were picked up at the higher June 36 strike for a pricier 2.41 each. The pessimistic view for next month was confirmed as some 1,800 calls were sold at the June 42.5 strike price for about 81 cents per contract. Option implied volatility on Best Buy has climbed since yesterday’s reading of 54% to the current value of 62%.

MBI MBIA Inc. – The financial services firm climbed as high as $7.90 today after reporting better-than-expected first-quarter results, although the stock has seen gains erode over the course of the trading day and is currently off by 4% to $6.69. MBIA announced earnings of $3.34 per share yesterday versus a loss of $12.92 per share in the same quarter one year ago. Analysts surveyed by Thomson Reuters must be surprised by the results as they had anticipated a loss of 33 cents per share for the quarter. Our attention was drawn to the January 2010 contract where one investor looks to have sold 5,000 puts at the January 2.5 strike price for a premium of 20 cents apiece in order to partially finance the purchase of 5,000 calls at the January 17.5 strike for 43 cents each. The net cost of getting super-bullish on MBI amounts to 23 cents to the investor. Shares will need to zoom upwards and gain about 168% from the current price to breach the breakeven point on the trade of $17.93 by expiration next year.

XLF Financial Select Sector SPDR – The financials ETF has experienced a share price decline of approximately 3.5% to $11.83 today. The December contract attracted one bearish investor looking for continued declines in the fund over the next six months. The stress test results are out of the bag and priced into the market, and we continue to observe many pessimistic option traders on financials. A ratio put spread was established through the purchase of 5,000 puts at the December 13 strike price for 2.64 apiece spread against the sale of 10,000 puts at the December 9.0 strike for 82 cents per contract. The net cost of the transaction amounts to 1.00 and yields a maximum potential profit of 3.00 to the investor if shares decline to $9.00 by expiration at the conclusion of 2009. The XLF will need to decline by 24% in order for financials-bear to rake in the full 3.00 premium.

HIG The Hartford Financial Services Group, Inc. – The insurance and financial services company has seen its share price slump by more than 5.5% to $15.12 amid broad declines experienced by many of the big financial stocks today. We observed one trader initiate a calendar spread in order to roll a currently out-of-the-money call position forward by one month. The sale of 7,500 calls at the May 16 strike price for a premium of 90 cents apiece was spread against the purchase of 7,500 calls at the June 16 strike for 2.30 per contract. The investor may be defending against a nearby corrective pullback in financials and is looking for shares to resume a rally next month. The investor would not want to see the May 16 calls landing in-the-money by expiration this Friday. The net cost of the spread amounts to 1.40 and yields a breakeven share price of $17.40 at which point the investor is positioned to accrue potentially unlimited gains to the upside. Option implied volatility appears to be on the rise today up to 121% currently from yesterday’s closing reading of 116%.

MOS The Mosaic Company – The provider of potash and animal feed has rallied by more than 6.5% to stand at $47.66. The global firm attracted the attention of some bullish investors looking for continued gains in the stock price as well as one trader who established a covered call. The June 55 strike price witnessed the purchase of some 1,800 calls for a premium of 85 cents apiece. Shares would need to breach the breakeven point by climbing 17% to $55.85 by expiration next month in order for investors long of the calls to begin to profit on the position. The September 55 strike price was the target of a covered call by one trader. This individual bought the stock this morning at around $44.40 and simultaneously sold nearly 5,000 calls at the September 55 strike price for a premium of 3.10 apiece. Since the sale was executed, shares of MOS have climbed steadily up to the current share price. The position appears to be working nicely on day one since the trade requires a move up in the shares towards the vicinity of the short call position, which effectively acts as an exit in the event that the calls expire in-the-money at expiration.

ASML ASML Holding NV – Shares of the provider of lithography systems for complex integrated circuits have dipped by less than 1% to $19.02. We observed a rash of put-selling this morning on the stock in three separate contracts. The put-shedding began at the June 17.5 strike price where 3,055 lots were sold for a premium of 66 cents apiece. Next the July 17.5 strike was targeted and another 3,055 puts shed yielded a premium of 1.05 per contract. Finally, the October 15 strike price witnessed the sale of 3,500 put options for about 1.00 apiece. The put sales on the stock can potentially be seen as a bullish signal for the stock as the premiums achieved by investor(s) selling the contracts will be retained in full if shares remain above the strike prices described.

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