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TiVo Implied Volatility Jumps With Share Price Gains

Today’s tickers: TIVO, ORCL, MSFT, VLO, BRCM, XLP, AMZN, MSFT & ELN

TIVO – TiVo, Inc. – Shares of the provider of technology and services for digital video recorders are soaring 8.5% higher to stand at the current price of $12.44. Investors expecting continued bullish movement in the price of the underlying purchased call options across multiple contracts. Near-term optimists picked up 6,500 calls at the November 12.5 strike for 86 cents each. Meanwhile, the higher November 15 strike had 1,600 calls coveted for about 25 cents apiece. Other traders looked to the December 12.5 strike where it seems some 5,000 calls were purchased for approximately 95 cents each. Finally, call spreads were transacted in the February 2010 contract. Investors purchased 3,000 calls at the February 12.5 strike for an average premium of 1.41 each, and sold 3,000 calls at the higher February 15 strike for about a dollar apiece. Option implied volatility on TIVO jumped 18% from an opening reading of 62% to an intraday high of 73%.

ORCL – Oracle Corp. – The software company is trading just 65 cents off the 52-week high of $22.90 today with shares up 0.25% to $22.25. Volume of 19,811 calls at the out-of-the-money November 23 strike exceeds existing open interest at that strike of 16,224 lots. The call activity appears to be the work of bullish investors buying approximately 14,500 calls for an average premium of 31 cents apiece. The December contract has also attracted the attention of option bulls. It looks like 9,000 calls were scooped up at the December 24 strike for about 40 cents each. Investors holding these contracts will profit by expiration if shares of ORCL surge 9.5% from the current price to $24.40.

MSFT – Microsoft Corp. – Investors are piling into call options on the world’s largest software maker following first-quarter earnings. The firm exceeded average analyst expectations of 32 per share by posting profits of 40 cents per share for the quarter. Shares of MSFT surged to a new 52-week of $29.20 – a 9.8% increase over the stock’s closing price – at the start of the trading day. Currently shares are slightly lower, though still up 7% to $28.44. Call options are the clear favorite with approximately 45,000 calls purchased at the November 30 strike for an average premium of 35 cents per contract. Approximately 84,400 call options traded hands at that strike on paltry existing open interest of just 11,542 lots. Investors buying these options expect the stock to rise another 7% by expiration next month – a bullish sign for the tech-sector bellwether. Traders may also be looking to bank a little intra-day buck before heading into the weekend. Early-bird call-buyers – at the November 30 strike for example – can easily take profits before the closing bell given the 280% increase in option premium at that strike. Other investors may be taking advantage of the shrinkage in implied volatility on the stock – down 20.47% to 23.08%.

VLO – Valero Energy Corp. – Shares of the owner and operator of refineries in North America are currently up 4% to $20.92, down from an intraday high of $21.37 this morning. VLO received an upgrade to ‘overweight/negative’ from ‘equal-weight/negative’ and a target price of $24.00 at Barclays Capital today. Bullish investors took to the November contract to purchase call options on the stock. It appears some 6,000 calls were picked up at the November 22 strike for an average premium for 65 cents apiece. More optimistic traders looked to the higher November 24 strike to get long of 1,400 calls at 20 cents per contract. Higher-strike call-buyers may accumulate profits if shares of VLO rally 16% from the current price to breach the breakeven point at $24.20 by expiration next month.

BRCM – Broadcom Corp. – Semiconductor company, Broadcom Corp, suffered a 10% decline in shares to $27.80 despite the fact that third-quarter earnings of 16 cents per share exceeded analyst expectations by about one nickel. Investors are likely disappointed by the firm’s guidance for the fourth-quarter as BRCM expects revenue to remain flat. Bearish sentiment took the form of a put spread in the December contract. It appears traders purchased 2,000 puts at the now in-the-money December 28 strike for 1.61 apiece, and simultaneously sold 2,000 puts at the lower December 26 strike for 93 cents premium each. The net cost of the transaction amounts to 68 cents per contract. Perhaps traders using this bearish strategy expect shares of BRCM to continue down to $26.00 by expiration. If this occurs, investors will reel in maximum potential profits of 1.32 per contract.

XLP – Consumer Staples Select Sector SPDR – The consumer staples exchange-traded fund jumped onto our ‘most active by options volume’ market scanner following a massive call transaction in the December contract. Shares of the XLP are currently off slightly by 1% to $26.08. It appears one investor purchased 50,000 calls at the December 27 strike for approximately 20 pennies per contract. The trader will begin to amass profits on the bullish position if shares of the fund rally 4% to surpass the breakeven price of $27.20 by expiration.

AMZN – Amazon.com, Inc. – Shares of the e-tailer exploded to the highest level in five years following third-quarter earnings. Amazon reported a 28% increase in sales for the quarter and proffered fourth-quarter guidance that far exceeded previous analyst expectations. Shares of AMZN are trading higher by nearly 21% to $112.89 as of 9:50 am (EDT). Option traders exchanged upwards of 101,000 contracts within the first 20 minutes of the trading day. Implied volatility on the stock plummeted 23% this morning to approximately 36%. Today’s volatility reading is a scant 1% above the 52-week low of 35% for AMZN attained back on September 11, 2009.

MSFT – Microsoft Corp. – Option traders are hard at work this morning, having traded more than 213,000 contracts on the software company by 10:00 am (EDT). Shares are flying higher by 8% to $28.81 – a new 52-week high for the stock. MSFT posted an 18% decline in earnings for the first-quarter with profits of 40 cents per share, which exceeded average forecasts of 32 cents per share. Call options at the November 30 strike are flying off the shelves like tickle-me-Elmo dolls. More than 70,000 contracts changed hands on previous existing open interest of just 11,542 lots.

ELN – Elan Corp. PLC – Investor uncertainty over Elan Corp. is mounting while shares of the biotechnology company are falling. The stock fell off the deep end this morning with shares down nearly 20% to $5.17 as of 10:15 am (EDT). Shares are currently just 32 cents higher than the 52-week low of $4.85 realized on March 6, 2009. Implied volatility on the stock is soaring 42.26% higher to 73.84%.


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