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Monday, February 6, 2023

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Marvell Technology Group Ltd. Call Options Fly Off The Shelves

Today’s tickers: MRVL, EFA, MSFT, PFE, BMY, BAC, GME, NFLX & PM

MRVL – Marvell Technology Group Ltd. – The semiconductor maker popped onto our ‘most active by options volume’ market scanner late in the session due to rampant call buying in the June and July contracts. Marvell’s shares are higher by 1.65% to $17.74 just before 3:30 pm (ET). Near-term optimistic individuals itching for continued appreciation in the price of the underlying stock purchased approximately 9,000 calls at the June $18 strike for an average premium of $0.33 apiece. Investors long the calls make money if Marvell’s shares rally at least 3.325% from the current price of $17.74 to exceed the average breakeven point to the upside at $18.33 by expiration day in one week. Buying interest spread to the July $18 strike where bullish players paid an average premium of $0.89 per contract to take ownership of some 5,100 call options. Traders holding these contracts accumulate profits as long as MRVL’s shares increase 6.5% to surpass the average breakeven price of $18.89 by July expiration.

EFA – iShares MSCI EAFE Index Fund – The implementation of a large-volume short strangle on the EFA, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the MSCI EAFE Index – an index which includes stocks from Europe, Australasia and the Far East, indicates one options strategist expects shares of the underlying fund to remain range-bound through September expiration. Shares of the EFA are trading lower by 0.63% to stand at $48.53 with less than 45 minutes remaining before the closing bell. The investor responsible for the strangle sold 16,000 puts at the September $42 strike for an average premium of $1.54 apiece in combination with the sale of the same number of calls at the higher September $52 strike for an average premium of $1.15 each. Gross premium pocketed on the transaction amounts to $2.69 per contract. The strangle-seller keeps the full premium received as long as the fund’s share price trades within the boundaries of the strike prices described through expiration. The short stance assumed in both call and put options expose the responsible party to losses in the event that shares rally above the upper breakeven price of $54.69, or if shares trade beneath the lower breakeven point at $39.31 at expiration. We note that shares of the fund have not traded below $43.29 in the past 52-weeks, however the price of EFA shares have rallied up to a 52-week high of $58.09 as recently as April 15, 2010.

MSFT – Microsoft Corp. – Buying interest in long-dated call options on software giant, Microsoft Corp., took place late in the trading day with shares of the underlying stock up 2.60% to $25.65 as of 12:40 pm (ET). Bullish options strategists purchased approximately 16,800 calls at the January 2012 $27.5 strike for an average premium of $2.96 per contract. Investors long the calls stand ready to accumulate profits if and when shares of the underlying stock rally 18.75% over the current price of $25.65 to exceed the average breakeven point on the calls at $30.46 by expiration day in January 2012. Options implied volatility on Microsoft Corp. is down 14.2% to 26.92% as of 3:45 pm (ET).

PFE – Pfizer, Inc. – Shares of the global pharmaceuticals firm are up 3.00% to $15.36 as of 12:22 pm (ET), but earlier rallied as much as 4.1% to secure an intraday high of $15.52 on news the company ended a trial of an experimental blood thinner after a panel revealed it decreased stroke risk in certain patients. Options traders populating Pfizer today initiated a number of bullish transactions to position for continued appreciation in the price of the underlying stock. Near-term optimists picked up 3,800 calls at the June $16 strike for an average premium of $0.07 each. Investors long the calls make money only if Pfizer’s shares increase another 4.6% to exceed the average breakeven price of $16.07 by expiration next Friday. Bulls meandering about the July contract sold approximately 3,300 puts at the July $14 strike to receive an average premium of $0.16 apiece, and shed another 1,500 puts at the higher July $15 strike for an average premium of $0.41 each. Put sellers may be ditching downside protection because they do not expect shares to reverse course ahead of July expiration. Otherwise, traders may be initiating outright bullish bets by selling the puts in order to pocket available premium. If the latter is true, investors keep the full premium received as long as shares exceed the strike prices described through expiration day next month. Bulls hankering for a rally picked up 2,100 calls at the July $16 strike for an average premium of $0.29 apiece. Pfizer’s shares must rise 6.05% in order for July $16 strike call buyers to make money above the average breakeven price of $16.29. The higher July $17 strike enticed optimistic individuals to shell out an average of $0.10 in premium to take ownership of some 3,200 call options. Higher-strike call buyers expect to profit if shares surge 11.3% over the current price of $15.36 to exceed $17.10 by July expiration. Finally, it looks like one long-term bullish player purchased a plain-vanilla debit call spread, buying 1,500 calls at the January 2011 $17.5 strike for $0.52 each, and selling the same number of calls at the higher January 2011 $20 strike for an average premium of $0.15 a-pop. Net premium paid for the transaction amounts to $0.37 per contract, thus positioning the investor to make money as long as shares jump 16.3% higher to surpass the effective breakeven point at $17.87. Maximum potential profits of $2.13 per contract pad the investor’s wallet if Pfizer’s shares add 30.2% to trade above $20.00 by January 2011 expiration.

BMY – Bristol-Myers Squibb Co. – The global biopharmaceutical company’s shares are trading 2.15% higher this afternoon to $25.17 on news Pfizer, Inc., its partner in creating the drug apixaban, ended a trial of an experimental blood thinner that reportedly helps reduce stroke risk in certain patients. Bristol-Myers Squibb’s shares were also helped higher by an upgrade to ‘outperform’ from ‘market perform’ at Leerink Swann, and an upgrade to ‘buy’ from ‘hold’ at Citigroup. Earlier in the trading session BMY’s shares rose 4.5% to attain an intraday high of $25.76. Bullish options traders populating the July contract sold short 2,000 puts at the July $23 strike for an average premium of $0.31 per contract. Investors selling the puts may retain the full premium received on the transaction as long as Bristol-Myers’ shares exceed $23.00 through July expiration. Individuals short the puts are prepared to have shares of the underlying stock put to them at an effective price of $22.69 each if the put contracts land in-the-money by expiration day next month.

BAC – Bank of America Corp. – BAC’s shares have spent the better part of the trading day vacillating about Thursday’s closing price of $15.46. Currently the financial firm’s shares are flat at $15.46 as of 12:55 pm (ET). Options activity on the stock has been relatively slow thus far today, but there is one transaction in the November contract that caught our attention. It looks like one wary options trader purchased a debit put spread, buying approximately 10,000 puts at the November $15 strike for an average premium of $1.62 apiece, and selling about the same number of contracts at the lower November $11 strike for an average premium of $0.48 each. The average net cost of the long-term bearish transaction amounts to $1.14 per contract. Thus, the put player is prepared to profit should shares of the underlying stock plunge 10.35% from the current price of $15.46 to breach the average breakeven point on the spread at $13.86 by November expiration. The transaction yields maximum potential profits of $2.86 per contract if BAC’s shares plummet 28.85% to $11.00 in the next five months to expiration day. If the investor is utilizing the spread to hedge a long position in the underlying shares, protection kicks in beneath the same $13.86 breakeven price described above, and maxes out if shares trade beneath $11.00.

GME – GameStop Corp. – Shares of the video game retailer rallied 3.75% to an intraday high of $22.03 this morning inspiring investor demand for near-term call options. GameStop’s shares are currently up a more modest 2.30% to stand at $21.72 as of 10:50 am (ET). Investors anticipating continued bullish movement in the price of the underlying shares purchased roughly 2,800 calls at the June $22 strike for an average premium of $0.42 per contract. Call buyers make money as long as the firm’s share price exceeds the average breakeven price of $22.42 ahead of expiration day next Friday.

NFLX – Netflix, Inc. – The bullish story for Netflix continues this morning with shares of the DVD-rental-by-mail service provider rallying more than 2.4% in early trading to an intraday and new 52-week high of $121.55. Shares of the underlying stock are currently up 1.00% to $119.85 as of 10:55 am (ET). Optimistic options traders once again sold out-of-the-money put options in the June contract. Investors sold approximately 2,200 puts at the June $115 strike to pocket an average premium of $2.78 apiece. Put sellers keep the full premium received on the transaction as long as NFLX shares exceed $115.00 through expiration day next week. Bulls short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $112.22 each should the puts land in-the-money by expiration.

PM – Phillip Morris International Inc. – Shares of the manufacturer of cigarettes and other tobacco products edged 2.30% lower this morning to $44.07 just after 11:00 am (ET). The decline in the price of the underlying shares inspired some traders to pick up near-term put options. Approximately 1,200 put contracts were purchased at the June $40 strike for an average premium of $0.17 apiece. Investors long the puts amass profits on the position if Phillip Morris International’s share price plummets 9.6% from the current value of the stock to breach the average breakeven point to the downside at $39.83 by expiration day. The demand for option contracts on the cigarette maker lifted PM’s overall reading of options implied volatility 7.9% to 28.90%.

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