Today’s tickers: EFA, HAL, VIAB, IR, EXPD, GE, CCL, V, & XRX
EFA – The exchange-traded fund representing stocks from Europe, Australasia, and the Far East attracted more than passing glances by bullish option traders today. The fund is currently higher by 1.5% to stand at $44.75. One optimistic individual appears to have sold 10,000 calls at the near-term July 46 strike price for 12 cents apiece in order to purchase 10,000 calls at the August 48 strike for 40 cents each. Rolling up to a higher strike cost the investor a net 28 cents per contract. Shares of EFA must rally through the breakeven point at $48.28 before the trader can reel in profits on the transaction. Bullish sentiment spread to the September contract where it appears that one trader initiated a covered call. The investor looks to have bought shares of the fund and concurrently shed 2,000 calls at the September 49 strike price for 58 cents per contract. The premium received for writing the calls reduced the price of getting long the stock to about $44.09 (assuming shares were trading at $44.67 at the time of execution). The short call position provides an effective exit strategy for the investor who will have shares of the fund called away from him in the event that the September 49 calls land in-the-money by expiration. Should this occur, the trader will have enjoyed gains of 11% on the rise in the price of the ETF. – iShares MSCI EAFE Index ETF
HAL – The oil and gas company jumped onto our ‘most active by options volume’ market scanner after a large chunk of puts were purchased in the January 2010 contract. Shares of the Houston, Texas-based firm are higher by 2% today to $19.29. Approximately 35,000 in-the-money put options were scooped up at the January 22 strike price for an average premium of 4.45 apiece. Perhaps the investor responsible for the transaction is long the stock and is looking to protect his position from potential downward movement in HAL through expiration in January. In this case the trader is hoping for the value of the stock to appreciate and would be considered bullish. On the other hand, the transaction could represent bearish speculation by an investor aiming to amass profits beneath the breakeven point to the downside at $17.55 by the start of 2010. – Halliburton Company
VIA B – The global entertainment content company has enjoyed a 2.5% rally in shares to arrive at the current price of $20.80. An option trader looking for long-term bullish movement in the price of the stock chose to extend a long call position out to expiration in December. The investor shed 30,000 calls at the September 22.5 strike price for a premium of 1.05 apiece and spread the sale against the purchase of 30,000 calls at the December 22.5 strike for 2.15 each. The net cost of extending the bullish position amounts to 1.10 per contract. Shares of Viacom must rise approximately 13% from the current price before the trader begins to realize profits at the breakeven point of $23.55. We note that the 60,000 lots traded on VIAB today represent about 35% of the total existing open interest on the stock of 174,306 contracts. – Viacom, Inc. Class B
IR– A calendar roll on IR caught our attention today amid a 1% rise in shares to $20.00. It looks as though one investor chose to extend downside protection on the stock by selling 5,000 put options at the July 20 strike price for 57 cents apiece and subsequently purchasing 5,000 puts at the August 20 strike for 1.55 per contract. The net cost of the spread amounts to 98 cents and yields a breakeven point to the downside at $19.02. If this individual is long the stock, his position is protected through expiration in August in the event that shares slip more than 5% through the breakeven point described above. Option implied volatility on IR climbed up to 55% today from Friday’s closing volatility reading of 50%. – Ingersoll-Rand PLC
EXPD – The provider of global logistics services popped onto our ‘hot by options volume’ market scanner after a chunk of put options were traded in the November contract. Shares of the firm dropped approximately 8% today to $29.10 after it revised its expectations for second-quarter results downward to about 25 cents from a previously forecast 30 cent EPS . The significant decline in shares would typically imply an increase in investor demand for downside protection. However, the 5,000 put options that were traded at the November 25 strike price today were sold for an average premium of 1.60 per contract. Such put-writing activity suggests that investors do not see shares of EXPD falling through $25.00 by expiration in November. The full 1.60 premium is fully retained by traders as long as the November 25 strike puts remain out-of-the-money. Investors short the put options bear the risk of having underlying shares of the company put to them at an effective price of $23.40 in the event that EXPD’s stock slips more than 14% from the current price per share. Option implied volatility on the stock jumped up to 53% this morning from Friday’s closing reading of 46%. – Expeditors International of Washington, Inc.
GE – Right out of the gate this morning keen call option buyers lifted around 7,000 bullish options granting rights to pay $11.00 for shares of General Electric ahead of expiration at the weekend. Shares in the conglomerate are higher by 6% at $11.45 having risen from $10.78 as at Friday’s close. Earnings are eagerly awaited at the start of Friday’s session and will largely determine whether or not the options bought today will expire with any life left in them or not. Investors scooped up a total of 24,000 calls starting out at a premium of 42 cents before the rally lifted them to 73 cents per contract offering instant gains for bulls. Investors then shifted their attention to the 12.0 strike where 15,000 calls have changed hands trading at premiums ranging from Friday’s 6 cent close to 18 cents ahead of noon on Monday. The July 11.0 strike puts were also active with 22,000 lots trading down from 53 to 28 cents per contract. – General Electric Corp.
CCL – Shares of the cruise line operator are currently higher by less than 1% to $24.88, erasing losses seen in the company’s stock in the early hours of the trading day. Option transactions on CCL today suggest near-term bearish sentiment by investors populating the August contract. The August 25 strike price had approximately 4,600 in-the-money put options purchased for an average premium of 1.91 apiece. Investors long of these puts will find that downside protection kicks in beneath the breakeven share price of $23.09. Option implied volatility is up around 6% at 53%. – Carnival Corporation
V – Shares of the world’s most recognized global financial services brand have declined slightly by less than .5% to stand at $59.74. Visa edged onto our ‘most active by options volume’ market scanner after one investor initiated a bullish reversal on the stock. Hoping for a near-term rally, the trader purchased 10,000 calls at the August 60 strike price for 2.72 apiece. The purchase was financed by the sale of 10,000 puts at the same strike for 3.30 each. The investor received a net credit of 58 cents on the transaction and has positioned himself to reap the benefits of bullish movement in the price of the underlying. Shares of Visa must rally a paltry .4% from the current price in order for this optimistic individual to add profits to the 58 cents already gained on the reversal. – Visa, Inc.
XRX – The technology and services enterprise has experienced a more than 2% rally in shares today to $6.26. Call options on Xerox are in high demand with the call-to-put ratio up to more than 73-to-1. Option volume was concentrated in the August contract where it appears that some traders chose to sell into the rally while others purchased calls. The now in-the-money August 6.0 strike had about 4,000 calls trade to the middle of the market and about 1,400 calls shed for an average premium of 45 cents apiece. The higher August 7.0 strike attracted traders who purchased about 12,000 calls for a volume-weighted average price of 12 cents per contract. Interestingly, these calls appear to be tied to stock in some way. Perhaps individuals that doubt shares will rally much higher sold the stock and bought call options to implement a stop-loss. If shares of Xerox climb through $7.00 by expiration in August, investors short the stock have the right to take delivery of the shares. Finally, bullish traders bought about 2,000 calls at the October 7.0 strike price for 24 cents each. Shares of XRX must rise 16% before investors long of the October 7.0 strike calls begin to amass profits. – Xerox Corp.