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Thursday, November 30, 2023

Counting the Silver, FedEx Bulls and Industrial Bears

Today’s tickers: IVN, FDX, XLI, HGSI, FXI, VIP, XLP & NOK

IVN – Shares of the international mineral exploration and development company surged 20% during the trading session to reach an intraday high of $10.66. The Canadian stock was fueled by reports which revealed that changes to Mongolia’s laws will help the company to complete an investment agreement on the Oyu Tolgoi copper-gold project in the near future. One investor, who had positioned himself to profit from a rally in Ivanhoe, was seen banking gains today by selling to close a long call position. It appears he originally purchased some 17,000 calls for an average premium of 90 cents each around July 30, 2009. Today he shed all 17,000 contracts for a premium of 2.05 apiece. The investor has realized approximate gains of 1.15 per contract for a total of $1,955,000. Bullish activity was seen at the March 2010 15 strike price where it looks like investor purchased 5,000 calls for one dollar apiece. Traders long the calls will profit if shares rally another 50% to breach the breakeven price of $16.00 by expiration next year. – Ivanhoe Mines Limited –

FDX – Bullish action on FedEx this afternoon boosted the firm onto our ‘most active by options volume’ market scanner with the stock trading more than 0.5% higher to $68.40. Traders shed 8,500 put options at the October 60 strike price to take in an average premium of 1.03 per contract. The full premium will be retained by these individuals as long as the puts land out-of-the-money at expiration. Investors are happy to accept the 1.03 premium in exchange for bearing the risk that the stock slips lower, and falls beneath the breakeven point to the downside at $58.97. Losses begin to accumulate for traders if FedEx trades at a price lower than the breakeven point by expiration in October. We note that the stock has remained above $60.00 since July 16, 2009. – FedEx Corp. –

XLI – The industrials exchange-traded fund has risen less than 1% to stand at $25.50. One investor took hold of a large chunk of put options on the XLI by purchasing 40,000 puts at the September 24 strike price for 25 cents apiece. This trader may be bearish, in which case he aims to amass profits to the downside if the XLI declines beneath $23.75 by expiration next month. Alternatively, the investor may have purchased shares of the underlying in the expectation that shares will continue to climb higher. If this is the case, the puts were picked up as an insurance policy in the event that the fund fails to rise. Next, a number of option strategies were employed by investors populating the January 2010 contract. Plain vanilla put buying was seen at the January 24 strike where 3,500 lots cost investors 1.35 each. Other traders initiated a sold strangle by shedding 1,000 puts at the January 25 strike for 1.68 each, in combination with the sale of 1,000 calls at the higher January 26 strike for 1.47. The gross premium of 3.15 on the strangle will be retained in full as long as shares of the XLI remain ‘strangled’ between the strike prices described. Finally, a bullish reversal was enacted at the January 24/26 strikes as an investor shed 1,000 puts at the lower strike for 1.65 each in order to finance the purchase of 1,000 higher strike calls for 1.50. This individual enjoys a net credit of 15 cents on the transaction and may achieve additional profits if the stock rallies higher than $26.00 by expiration. – Industrial Select Sector SPDR –

HGSI – Pre-market rumors that Glaxo-Smith Kline (GSK) may be planning a $30.00 per share takeover of HGSI launched shares of the biopharmaceutical company to a new 52-week high. Shares have rallied more than 11% today to stand at $19.09. Bullish options activity was observed in the near-term September contract where investors eyed out-of-the-money calls. The September 22.5 strike had approximately 1,000 calls coveted for an average premium of 81 cents apiece. Uber-bullish traders targeted the higher September 25 strike where more than 2,800 calls were purchased for 54 cents a-pop. Shares would need to gain another 34% from the current price in order for call buyers to begin to amass profits at the breakeven price of $25.54. Investor uncertainty has apparently surged on HGSI because the stock’s option implied volatility has jumped 25% higher during the session to the current reading of 100%. – Human Genome Sciences, Inc. –

FXI – We noted in our FX commentary this morning that Chinese concerns over the sluggish external environment, although weighing on regional stocks, were losing out to the more optimistic prospects carried by the S&P Case-Shiller index. Investors in Chinese stocks sought some protection from further slippage in the iShares China ETF as they bought protective put options at the September 40 strike as shares were a little higher today at $40.81. Around 8,000 puts were bought at premiums up to 1.25, which implies a further decline within a month to $38.75. However, further dated options indicated a rosier scenario. A bull call spread using January 2011 options involving 6,000 calls at the 40 strike bought against the sale of the same amount of 45 strike calls, depicts a “steady as she goes” approach to Chinese stocks. The trade cost 2.12 to enact meaning that the investor would make a maximum of 2.88 per contract in the event the FXI rose by at least 10% before 2011. To put that in perspective one year ago shares reached $47.75 while a price of $46.09 would be a 50% Fibonacci retracement of the major market decline. Doesn’t seem like too much to ask for. – iShares FTSE/ Xinhua China 25 ETF –

VIP – The Russian telecommunications company appeared on our ‘hot by options volume’ market scanner this morning after bearish activity was detected in the October contract. Shares of VIP are currently trading 1.5% lower to stand at $14.96 ahead of the firm’s second-quarter operating results scheduled for release on Thursday morning. A ratio put spread was enacted by an investor who perhaps expects less-than-stellar results from the company. The transaction involved the purchase of approximately 3,550 puts at the now in-the-money October 15 strike price for an average premium of 1.55 apiece, spread against the sale of 10,000 puts at the lower October 12.5 strike for 55 cents each. The investor has practically put on the trade at no cost because he shed far more puts at the lower strike than he purchased at the upper strike. Hypothetically speaking, if the trade was enacted for free, the investor has already breached the breakeven point at $15.00, and stands to accrue maximum potential profits of 2.50 per contract if shares of VIP fall to $12.50 by expiration. If VIP plummets through the lower strike by expiration, the investor is vulnerable to losses when the ratio nature of the spread quickly eats through the stored gains. We make that point approximately $11.12 on today’s trade size. – Vimpel Communications –

XLP – Shares of the consumer staples exchange-traded fund have added more than 0.5% today to arrive at the current price of $24.90. Bullish action in the form of a reversal play was observed in the January 2010 contract. The investor responsible for the transaction shed 5,000 puts at the January 21 strike price for 20 cents each in order to partially finance the purchase of 5,000 calls at the higher January 26 strike for 50 cents apiece. The net cost of the bullish reversal amounts to 30 cents. Shares of the XLP must rally higher by about 6% in order for the trader to breakeven at $26.30. – Consumer Staples Select Sector SPDR –

NOK – The manufacturer of mobile devices edged onto our ‘most active by options volume’ market scanner this morning due to near-term bullish activity on the stock. Shares of NOK are currently higher by more than 1% to $12.65. Option traders lunged for calls at the September 13 strike price where it appears that some 11,000 lots were purchased for an average premium of 40 cents per contract. Perhaps the optimism today stems from reports that the firm’s ‘Nokia 5230’, a touch-screen phone with music and applications support, is expected to be delivered in the fourth-quarter. Investors likely looking to take delivery of the underlying stock, bought 1,800 calls at the now in-the-money September 12 strike price for a dollar apiece. – Nokia Corporation –


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