Today’s tickers: BPOP, SLV, XRT, RCL, USO, MRO, AVP, PG & CROX
BPOP – Popular, Inc. – Shares of the largest bank in Puerto Rico surged 26.5% during the trading session to a new 52-week high of $3.86 after the firm was raised to ‘buy’ from ‘neutral’ and given a target share price of $3.50 at B. Riley & Co. Popular’s shares took off running on news the company may sell its Evertec unit and some other businesses for $1 billion. Options traders enacted bullish strategies on the stock to position for continued upward movement in the price of the underlying stock. Plain-vanilla call buying took place at the April $3.5 strike where approximately 9,400 now in-the-money contracts were picked up for an average premium of $0.14 apiece. Other traders displayed optimism on Popular, Inc. by shedding put options. Roughly 4,500 puts were sold short at the April $3.0 strike for a premium of $0.06 each. Investors keep the premium received as long as shares trade above $3.00 through expiration day on Friday. Similar bullish activity was observed in the May contract today. Investors paid an average premium of $0.28 per contract to take ownership of nearly 8,000 in-the-money call contracts at the May $3.5 strike price. Additionally, traders expecting shares of BPOP to remain above $3.50 through May expiration shed 6,200 put options at the May $3.5 strike to receive an average premium of $0.33 each. Put sellers at this strike price keep the full premium pocketed on the trade as long as shares of the underlying stock exceed $3.50 through expiration day. Investors short the puts are apparently happy to have BPOP-shares put to them at an effective price of $3.17 each should the put options land in-the-money at expiration. Options players exchange 83,855 contracts at Popular, Inc. as of 3:00 pm (ET), which represent more than 55% of the total existing open interest on the stock of 151,847 contracts.
SLV – iShares Silver Trust ETF – Shares of the silver ETF, an exchange-traded fund whose share price typically reflects the price of silver owned by the Trust at any given time less the Trust’s expenses and liabilities, increased 0.35% in late afternoon trading to stand at $17.87. Options activity on the stock, however, indicates at least one investor is expecting the price of the underlying shares to decline ahead of July expiration. It looks like the bearish player purchased approximately 20,000 put contracts at the July $16 strike for an average premium of $0.37 apiece. The investor makes money on the transaction if the SLV’s share price plummets 12.5% from the current price to breach the effective breakeven price on the puts at $15.63 by expiration day in July.
XRT – SPDR S&P Retail ETF – Bearish put butterfly spreads dominated options activity on the XRT, an exchange-traded fund that replicates the performance of the S&P Retail Select Industry Index, today indicating some options players are expecting shares of the underlying fund to slip ahead of May expiration. Shares of the ETF are down slightly by 0.05% to $42.66 as of 11:55 am (ET). At least three distinct butterfly spreads were established on the XRT thus far in the session. Two of the trades utilized the same three strike prices, while the third and smallest put ‘fly spread broke away from the pack by using different strikes. The more popular parameters engaged by bearish butterfly traders involved the purchase of a total of 20,000 puts at the May $34 strike for a premium of $0.04 apiece [wing 1] and the purchase of 20,000 puts at the higher May $40 strike for $0.46 premium per contract [wing 2]. The body of the butterfly was transacted at the central May $37 strike where 40,000 puts were shed for a premium of $0.12 each. Net premium paid for this trade amounts to $0.26 per contract. Therefore, investors putting on this bearish transaction are prepared to accumulate maximum potential profits of $2.74 per contract if shares of the underlying fund decline 13.25% from the current price to settle at $37.00 at expiration. Traders start to make money as long as the XRT’s share price dips below the upper breakeven point at $39.74. A similar, albeit smaller, butterfly spread was also initiated in the May contract but yields maximum benefits to the investor responsible for the trade if shares slip to $38.00 by expiration rather than the $37.00 strike price described in the previous transaction. In this put butterfly trade, the investor purchased 3,000 puts at the May $40/$36 strike prices [wings 1 and 2] for a gross premium of $0.55 apiece, and sold 6,000 puts at the central May $38 strike for $0.19 apiece. The net premium paid for this trade amounts to just $0.17 per contract and yields maximum potential profits of $1.83 per contract should shares of the retail ETF drop to $37.00 by expiration day next month.
RCL – Royal Caribbean Cruises Ltd. – The cruise line operator has once again proven itself to be a favorite spot for cautiously optimistic options investors to wed put options with shares of the underlying stock. RCL’s shares declined 0.95% during the first half of the trading day to stand at $33.92 as of 12:25 pm (ET). It looks like one options investor purchased 15,000 put options at the September $31 strike for an average premium of $2.60 per contract in combination with the purchase of a large underlying stock position for approximately $34.36 per share this morning. The put buyer is hoping to see Royal Caribbean’s share price rally hard and fast, but in case such circumstances are not in the cards, the investor has also shelled out extra premium to protect the value of the underlying shares with long put contracts. Downside protection kicks in if RCL’s shares sink 16.3% from the current price to breach the effective breakeven point on the puts at $28.40 by expiration day in September.
USO – United States Oil Fund LP – Shares of the U.S. Oil Fund Limited Partnership surrendered 0.60% of their value during the first half of the trading session to stand at $40.69. Despite the slight dip in share price today, one options investor initiated a medium-term bullish stance on the fund. The optimistic individual purchased 2,000 calls at the July $43 strike for an average premium of $1.36 apiece, and sold the same number of calls at the higher July $48 strike for $0.41 each. The debit call spread in this case cost the investor a net premium of $0.95 per contract. Maximum available profits of $4.05 accumulate for the bullish player if shares of the underlying fund surge 18% from the current price to exceed $48.00 by expiration day in July. The trader starts to make money as long as the USO’s share price edges above the breakeven point on the spread at $43.95 ahead of expiration.
MRO – Marathon Oil Corp. – The oil and gas exploration and development company enticed bullish options players to the July contract today despite the 0.60% decline in the value of its shares to $32.01. One optimistic investor purchased a debit call spread in order to position for a sharp increase in the price of the underlying stock by expiration in the next several months time. The trader picked up 2,500 calls at the July $33 strike for an average premium of $1.32 apiece, and sold the same number of calls at the higher July $37 strike for $0.22 each. Net premium paid for the spread amounts to $1.10 per contract. Thus, the bullish player is prepared to accrue maximum potential profits of $2.90 per contract if Marathon’s share price surges 15.6% over the current value of the stock to exceed $37.00 by expiration day in July.
AVP – Avon Products, Inc. – The overall reading of options implied volatility – a measure of investor uncertainty – on the beauty products company is flying higher this morning while the firm’s share price is eroding on news regarding the suspension of four executives at Avon Products, Inc. The Wall Street Journal revealed that Avon put four executives on administrative leave because of an investigation into bribery allegations that reportedly started in China. Avon’s shares are currently trading 7.95% lower to $32.00, while the stock’s overall reading of options implied volatility stands 30.3% higher at 39.85% as of 10:50 am (ET). Options traders expecting continued bearish movement in the price of the underlying initiated pessimistic plays on the stock this morning. Investors picked up 1,800 now in-the-money puts at the May $33 strike for an average premium of $1.67 apiece. Put-buyers at this strike are positioned to accrue profits should AVP’s share price dip below the effective breakeven price of $31.33 by May expiration day. Early movers were able to purchase the puts for an average premium of $1.67 each, but investors looking to buy the same contracts 90 minutes into the session must now shell out $2.20 each for the same contracts. Pessimism spread to the October $30 strike where long-term bearish players purchased 1,900 puts for an average premium of $1.60 per contract. Investors holding these put options stand ready to amass profits if Avon’s shares plummet 11.25% from the current price of $32.00 to breach the average breakeven price of $28.40 by October expiration. More than 19,750 option contracts changed hands on Avon Products, Inc. by 11:00 am (ET).
PG – The Proctor & Gamble Co. – Bullish options activity on consumer products giant, Proctor & Gamble, indicates some investors anticipate significant appreciation in the price of the underlying shares by May expiration. PG’s shares increased 0.20% to $62.85 by 11:00 am (ET). Investors shelled out an average premium of $0.29 per contract to pick up roughly 15,800 call options at the May $65 strike price. Plain-vanilla call buyers in this case are positioned to accrue profits should PG’s share price surge 3.9% from the current price to surpass the average breakeven price of $65.29 by expiration day next month. Bullish players holding the call options are apparently expecting the stock to trade at a new 52-week high by May expiration given the current 52-week high on PG of $64.58 attained back on March 23, 2010.
CROX – Crocs, Inc. – The maker of plastic hole-ridden clogs and other footwear and apparel experienced a more than 9.2% rally in the price of its shares to a new 52-week high of $9.71 this morning after the firm was raised to ‘overweight’ from ‘market weight’ with a new 12-month target share price of $12.00 at Thomas Weisel Partners. Options investors revealed optimistic sentiment on the stock by purchasing more than 1,200 call options at the June $10 strike for an average premium of $0.68 per contract. Bullish players long the calls make money if CROX’s share price increases another 10% from the current price of $9.71 to exceed the average breakeven price on the calls at $10.68 by expiration day in June.