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Monsanto Attracts Bevy of Bears

Today’s tickers: MON, AA, NFLX, EWG, NKE, EQIX & V

MON – Monsanto Co. – Bearish options investors are having a field day selling out-of-the-money call options on agricultural products manufacturer, Monsanto Co., today with shares of the underlying stock down 2.60% to $55.37 as of 12:20 pm (ET). Options players expecting shares of the maker of genetically modified seeds to trade below $60.00 through May expiration shed 1,400 calls at the May $60 strike to receive an average premium of $0.22 per contract. Pessimists with a larger appetite for risk shed some 4,200 calls at the May $57.5 strike to pocket an average premium of $0.61 per contract. Investors short the May $57.5 strike calls keep the full premium received as long as Monsanto’s share price does not exceed $57.50 at expiration day this month. The $0.61 premium per contract is theirs to keep in exchange for bearing the risk that shares rebound ahead of expiration. Call-sellers face potentially unlimited losses to the upside if Monsanto’s share price rallies 4.95% over the current value of $55.27 to surpass the effective breakeven price of $58.11. Options implied volatility on Monsanto is up 9% to 36.03% as of 12:30 pm (ET).

AA – Alcoa, Inc. – A large-volume transaction involving call options on the aluminum manufacturer indicates one big options player is itching for a sharp rally in the price of the underlying stock by September expiration. Alcoa’s shares are trading 4.55% higher on the day at $13.03, and earlier touched an intraday high of $13.24. It looks like the investor picked up 20,000 in-the-money calls at the October $12 strike for a premium of $2.09 each and simultaneously sold the same number of calls at the higher October $16 strike for a premium of $0.50 apiece. The net cost of the transaction amounts to $1.59 per contract. Thus, the optimistic individual is positioned to accrue maximum potential profits of $2.41 per contract should Alcoa’s shares surge 22.8% from the current value of $13.03 to surpass the $16.00-level by expiration day in September.

NFLX – Netflix, Inc. – Shares of the provider of DVD-rental-by-mail services surged as much as 10.8% during the first half of the trading session to attain a new 52-week high of $119.50. Netflix, Inc. shares are currently up a more modest 6.35% to $114.73 as of 12:40 pm (ET). Near-term optimistic traders hoping to see shares of the underlying stock break through today’s intraday- and 52-week high of $119.50 purchased 1,100 calls at the May $120 strike for an average premium of $3.88 each. Call-coveters at this strike make money only if NFLX shares rally another 3.66% over and above $119.50 to surpass the average breakeven point to the upside at $123.88 by expiration day. Options implied volatility on the stock is up sharply by 17% to 67.01%.

EWG – iShares MSCI Germany Index – Options trading activity on the EWG, an exchange-traded fund that seeks to yield investment results that correspond to the price and yield performance of publicly traded securities in the aggregate in the German market – as measured by the MSCI Germany Index, suggests some investor pessimism on the fund. Shares of the underlying fund are currently up 0.15% to $20.65. Near-term bearish traders sold 4,400 calls at the May $21 strike to take in a premium of $0.30 per contract. Call-sellers keep the full premium received on the transaction as long as shares of the EWG trade below $21.00 through expiration. If investors short the calls do not currently hold long underlying stock positions they may face devastating losses if the EWG’s share price exceeds $21.30 ahead of expiration day in May. Additional bearish sentiment on the fund is apparent at the October $19 strike where 1,700 put contracts were purchased at an average premium of $1.09 each. Put-purchasers are prepared to profit should shares of the fund decline 13.25% below the current value of $20.65 to breach the average breakeven price of $17.91 by October expiration.

NKE – Nike, Inc. – A short strangle enacted on the maker of athletic footwear and accessories in the first 30 minutes of the trading day indicates one investor expects shares of the underlying stock to remain range-bound through October expiration. Nike’s shares slipped slightly lower by 0.75% to $77.27 this morning. Shares rallied significantly earlier this week, adding a total of 5.50% from Monday’s low of $73.74, up to Wednesday’s high of $77.79. The stock received an upgrade to ‘buy’ from ‘neutral’ and an increased 12-month target share price of $85.00 at Sterne, Agee & Leach on Monday. One options player, however, expects share price movement to quiet down and volatility to subside through October expiration. The investor sold 5,100 puts at the October $70 strike for a premium of $2.90 each and sold the same number of calls at the October $80 strike for $4.40 apiece. Gross premium pocketed on the strangle strategy amounts to $7.30 per contract. The investor keeps the full amount of premium received as long as shares of the underlying stock trade within the boundaries of the strike prices described through expiration. But, the short stance assumed in both call and put options expose the strangle-player to losses should Nike’s share price rally above the upper breakeven price of $87.30, or should shares plummet through the lower breakeven price of $62.70, ahead of expiration day in October.

EQIX – Equinix, Inc. – Options players breakfasted on Equinix call options in the early hours of the trading session with shares of the provider of data center services gaining as much as 8.25% to reach an intraday high of $107.44. EQIX shares tapered off slightly by 10:40 am (ET), but are still net up 5.45% at $104.65. Bullish traders expecting continued share price appreciation ahead of May expiration picked up roughly 2,300 calls at the May $105 strike for an average premium of $1.03 apiece. Investors long the calls make money as long as shares of the underlying stock rally above the average breakeven price of $106.03 by expiration day. Buying interest spread to the higher May $110 strike where investors scooped up 1,000 calls at an average premium of $0.78 each. Traders holding the higher-strike contracts profit if Equinix, Inc. shares surge 5.85% over the current price of $104.65 to break through the current 52-week high on the stock of $110.57, and ultimately exceed the average breakeven point on the calls at $110.78 by May expiration. The surge in investor demand for call options on the stock lifted EQIX’s overall reading of options implied volatility 25% to 42.84% as of 10:45 am (ET).

V – Visa, Inc. – Shares of the global payments company are up more than 2.05% to $87.45 just before 11:00 am (ET). The rally in the price of the underlying shares during the past couple of days inspired investor appetite for call options on the stock. Near-term optimists positioning for continued share price appreciation picked up at least 5,500 calls at the May $90 strike for an average premium of $0.69 apiece. Call-buyers make money if Visa’s shares exceed $90.69 by expiration day in May.


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