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Xyratex’s Earnings Forecast Inspires Bullish Options Activity

Today’s tickers: XRTX, EXEL, PBR, F, BPOP, ALTH, RIG, MYL, HIG & SYMC

XRTX – Xyratex, Ltd. – Shares of the provider of data storage and network technology surged 13.7% at the start of the trading session to a new 52-week high of $19.25 after the firm said it anticipates earnings per share of at least $1.10 in the second quarter. The company’s earnings forecast is significantly greater than the consensus estimate of $0.76 per share. The wear-and-tear of the trading session parsed some of the early-morning rally, but Xyratex’s shares are still up 9.50% to $18.56 as of 2:45 pm (ET). Bullish investors prepared for continued appreciation in the price of the underlying by purchasing 1,100 calls at the June $20 strike for an average premium of $1.49 apiece. Call-buyers at this strike profit only if shares surge 15.8% from the current price of $18.56 to exceed the effective breakeven point at $21.49 by expiration day in June. Options traders exchanged 5,025 contracts on the stock during the trading day, which is nearly on par with total existing open interest on XRTX of 5,656 contracts.

EXEL – Exelixis, Inc. – Bullish options trading tactics were employed on the biotechnology company this afternoon as the firm’s shares surged 11.7% to an intraday high of $6.78. It looks like one investor sold 5,000 puts short at the November $5.0 strike price to take in an average premium of $0.40 per contract. The put seller keeps the full premium received on the transaction as long as shares of Exelixis trade above $5.00 through expiration day in November. By selling the put contracts, the investor implies he is willing to have shares of the underlying stock put to him at an effective price of $4.60 each in the event that the put options land in-the-money at expiration. The jump in options activity on the stock and the shift in share price lifted the overall reading of options implied volatility on Exelixis 42.2% to 82.1% in the final hours of the trading week.

PBR – Petroleo Brasileiro SA – A debit call spread enacted on Brazilian oil and gas company, Petroleo Brasileiro, suggests one investor is positioning for continued bullish movement in the price of the underlying stock through July expiration. PetroBras’ shares rallied 1.9% late in afternoon trading to stand at $45.35 as of 2:30 pm (ET). The optimistic options trader purchased 2,500 calls at the July $46 strike for an average premium of $2.61 apiece, and sold the same number of calls at the higher July $47 strike for a premium of $2.17 each. Net premium paid for the transaction amounts to $0.44 per contract, thus yielding maximum potential profits of $0.56 to the bullish player if PBR’s shares rally 3.65% from the current price to $47.00 ahead of expiration day in July.

F – Ford Motor Co. – The Dearborn, MI-based automaker’s shares recovered a portion of the previous session’s 5.5% decline today after the company said its sales in China surged 84% in the first quarter on increased demand for passenger cars and commercial vehicles. Ford’s shares are currently trading 2.4% higher on the day to stand at $12.87 as of 11:55 am (ET). One bullish options player employed the use of a debit call spread in the May contract in order to position for continued share price appreciation through expiration. The investor purchased 10,000 calls at the May $14 strike for an average premium of $0.38 apiece and sold the same number of calls at the higher May $16 strike for $0.08 each. Net premium paid for the spread amounts to $0.30 per contract. The trader stands ready to accumulate maximum potential profits of $1.70 per contract – for total gains of $1.7 million – should Ford’s share price jump more than 24.3% from the current price to surpass $16.00 ahead of expiration day in May. Options investors exchanged more than 132,800 contracts on the auto manufacturer in the first half of the trading day, and displayed a preference for calls by trading more than 2 call options for each single put contract in play thus far in the session.

BPOP – Popular, Inc. – Plain-vanilla call buying activity dominated options trading patterns on the bank holding company based in Puerto Rico today as shares of the underlying stock increased 0.70% to $2.93. It looks like one investor expecting Popular’s share price to continue higher in the next couple of months purchased approximately 37,000 call options at the May $3.0 strike for an average premium of $0.26 per contract. The financial firm’s shares must rally at least 11.25% from the current price before the call buyer starts to make money above the breakeven point on the calls at $3.26. The surge in options activity on the stock lifted the overall reading of options implied volatility on Popular, Inc. some 20.9% to 69.14% as of 12:15 pm (ET). BPOP’s shares last traded above $3.26 back on May 13, 2009, when the price of the stock reached an intraday high of $3.28.

ALTH – Allos Therapeutics, Inc. – Medium-term bullish options trading activity is apparent on biopharmaceutical company, Allos Therapeutics, Inc., today with its underlying share price trading 1.5% higher to $7.54. Optimistic investors purchased 5,000 call options on the stock at the July $10 strike for an average premium of $0.50 per contract. Call-buyers at this strike are prepared to profit should the biotechnology firm’s shares explode 39.25% higher to exceed the effective breakeven point at $10.50 ahead of expiration day in July. Additional bullish signals were sent by put sellers targeting the July $5.0 strike where about 4,000 puts were sold for an average premium of $0.20 apiece. Investors selling put options keep the full $0.20 premium per contract as long as Allos Therapeutics’ shares trade above $5.00 through expiration. Put-sellers indicate they are happy to have shares of the underlying stock put to them at an effective price of $4.80 each in the event that the put contracts land in-the-money at expiration.

RIG – Transocean Ltd. – The international provider of offshore contract drilling services for oil and gas wells attracted bearish options traders during the session despite the more than 2.9% increase in the value of its shares to $88.91 today. Perhaps anticipating a pullback in the value of RIG’s shares in the next two months, one pessimistic player enacted a ratio put spread in the May contract. The trader purchased 1,500 puts at the May $80 strike for an average premium of $1.14 apiece, and sold 3,000 puts at the lower May $75 strike for a premium of $0.48 each. The net cost of the bearish spread amounts to $0.18 per contract. Thus, the contrarian trader stands ready to accumulate maximum potential profits of $4.82 per contract should Transocean’s share price plummet 15.65% from the current value to $75.00 ahead of expiration day in May. Profits start to accumulate to the downside if the contract driller’s shares slip beneath the effective breakeven price of $79.82 by May expiration.

MYL – Mylan, Inc. – Shares of the global pharmaceutical company rallied 1.7% at the start of the trading session to secure a new 52-week high of $23.33. The increase in Mylan’s share price this morning fueled investor demand for call options on the stock. Options traders honed in on call options and purchased more than 6,700 contracts at the April $24 strike for an average premium of $0.22 apiece. Investors long the calls are prepared to amass profits should Mylan’s shares continue to rise through the effective breakeven price of $24.33 ahead of expiration day. Optimism spread to the higher May $25 strike where approximately 1,100 call options were coveted for an average premium of $0.38 each. Shares must rally at least 8.75% from the new 52-week high of $23.33 to surpass the breakeven price on the calls at $25.38. The surge in investor demand for call options on Mylan boosted the overall reading of options implied volatility on the stock by 16.3% to 29.12% as of 10:40 am (ET).

HIG – Hartford Financial Services Group, Inc. – The insurer’s shares rallied Wednesday afternoon on news the firm repaid a $3.4 billion government bailout, and continued higher this morning after the firm revealed it expects total annuity sales of $5 billion in 2012. HIG’s share price increased more than 2.5% to reach an intraday high of $29.25. Some options traders positioned for continued bullish movement in the price of the insurance company’s shares by purchasing 1,600 calls at the April $30 strike for an average premium of $0.40 apiece. These traders make money if shares rally above the breakeven price of $30.40 ahead of expiration day. Other investors signaled they expect limited near-term appreciation in HIG’s stock price by selling about 2,300 calls at the higher April $31 strike for an average premium of $0.19 each. Call-sellers keep the $0.19 premium received today as long as shares trade below $31.00 through expiration this month. Additionally, investors selling the higher strike call options run the risk of having shares of the underlying stock called from them at $31.00 apiece should the call contracts land in-the-money at expiration.

SYMC – Symantec Corp. – The provider of security, storage and systems management solutions to businesses and consumers enticed bullish options traders in early trading today with shares of the underlying stock up a modest 0.15% to $16.95. Optimistic investors sold roughly 3,200 put options short at the May $16 strike to pocket an average premium of $0.30 per contract. Plain-vanilla put sellers keep the full premium received today as long as Symantec’s shares trade above $16.00 through May expiration day. The short sale of the put contracts indicates investors are happy to have shares of the underlying put to them at an effective price of $15.70 apiece should the put contracts land in-the-money at expiration.


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