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Options Strategist Portends Big Rebound at Anadarko by Jan. 2011 Expiration

Today’s tickers: APC, FSLR, SFY, V, XRT, NFLX, DV, MTB, SWY & SNE

APC – Anadarko Petroleum Corp. – Trading in longer-dated call options on Anadarko Petroleum this afternoon indicates one options strategist is expecting shares of the independent oil and gas exploration and production company to rebound significantly by expiration in January 2011. APC’s shares rallied 1.5% at the start of the trading session to reach an intraday high of $43.70. However, as the day progressed, shares lost momentum and are currently down 3.90% on the day at $41.38 with 45 minutes remaining before the closing bell. The long-term bullish player appears to have enacted a ratio call spread, buying 2,000 in-the-money calls at the January 2011 $40 strike for a hefty premium of $10.30 apiece, and selling 4,000 calls at the higher January 2011 $55 strike for a premium of $3.60 each. The net cost of the spread amounts to $3.10 per contract. Therefore, the trader is poised to profit should shares of the underlying stock rebound 4.15% to surpass the effective breakeven price of $43.10 by January expiration. The investor stands ready to accrue maximum potential profits of $11.90 per contract in the event that APC’s shares surge 32.9% from the current price of $41.38 to settle at $55.00 by expiration day.

FSLR – First Solar, Inc. – Bullish options players dominated activity on the manufacturer of photovoltaic solar power systems today with shares of the underlying stock rallying sharply by as much as 5.98% this morning to an intraday high of $125.88, the highest the stock has been in one month. The maker of solar modules was raised to ‘outperform’ from ‘neutral’ at Credit Suisse today where analysts upped their target price on the stock to $150.00 from $110.20. First Solar’s shares tapered off by late afternoon to stand 3.50% higher on the day at $122.93 just before 3:30 pm (ET). Investors positioning for continued upward movement in FSLR’s shares by June expiration purchased at least 1,300 calls at the June $125 strike for an average premium of $1.72 apiece. Call buyers at this strike price make money only if shares of the underlying stock trade above the average breakeven price of $126.72 by expiration tomorrow. Buying interest spread to the higher June $130 strike where roughly 1,100 call options were purchased for an average premium of $0.42 per contract. First Solar’s share price would need to jump 6% from the current price of $122.93 in order for call buyers at the June $130 strike to profit above the effective breakeven point at $130.42 by expiration day.

SFY – Swift Energy Co. – Bears lumbered across the options field on Swift Energy, a company engaged in developing, exploring, acquiring and operating oil and natural gas properties, today as shares surrendered more than 3.25% to trade at $31.81 by 3:45 pm (ET). Pessimistic players doubting Swift’s shares will rebound significantly in the next several weeks sold short more than 2,900 calls at the July $35 strike to pocket an average premium of $0.72 per contract. Investors short the calls keep the full premium received on the sale as long as shares of the underlying stock do not breach $35.00 by July expiration.

V – Visa, Inc. – Shares of the global payments technology company are up 0.75% to $77.76 just before 1:40 pm (ET), but earlier in the session rallied as much as 2.5% to an intraday high of $79.13. The bullish movement in the price of the underlying shares inspired near-term optimists to take action. Investors purchased approximately 4,400 calls at the June $80 strike for an average premium of $0.33 apiece. Call buyers at this strike price lose the entire premium paid for the calls if they land out-of-the-money tomorrow. But, investors long the calls are poised to profit if shares of the credit card company rally through the average breakeven price of $80.33 ahead of June expiration. Bullish individuals populated the July $80 strike where 1,200 call options were purchased at an average premium of $2.37 apiece. Options traders long the July $80 strike calls make money if, by July expiration, shares increase 5.9% over the current price of $77.76 to exceed the effective breakeven point at $82.37. Finally, uber-bulls bought roughly 1,700 calls at the higher July $85 strike for an average premium of $0.84 a-pop. Higher-strike call coveters profit only if Visa’s shares surge 10.4% to trade above the breakeven price of $85.84 by expiration day next month.

XRT – SPDR S&P Retail ETF – The purchase of a debit put spread on the XRT, an exchange-traded fund designed to mirror the performance of the S&P Retail Select Industry Index, suggests one options strategist expects the fund’s share price to decline ahead of September expiration. Shares of the XRT are currently trading lower by 1.15% to stand at $39.77 just before 1:00 pm (ET). The bearish investor appears to have purchased 3,000 puts at the September $38 strike for a premium of $2.16 each, spread against the sale of the same number of puts at the lower September $34 strike for $1.04 apiece. The net cost of establishing the spread amounts to $1.12 per contract. Thus, the trader stands ready to profit if shares of the ETF fall 7.26% from the current price to breach the effective breakeven point to the downside at $36.88 by expiration. Maximum available profits of $2.88 per contract pad the investor’s wallet if, by September expiration, the XRT’s shares are down 14.5% to trade at or below $34.00 each.

NFLX – Netflix, Inc. – The provider of DVD-rental-by-mail service received a vote of confidence by one option strategist observed dabbling in July contract calls in the first half of the session. Netflix shares are up 0.76% to trade at $125.58 by 1:10 pm (ET) after earlier rallying 2.5% to an intraday high of $127.80 in morning trading. It looks like one bullish investor opted to roll a long call position to a higher strike price in the July contract. The trader appears to have sold 2,000 calls at the July $130 strike for an average premium of $5.78 each in order to buy the same number of calls at the higher July $135 strike for $3.98 apiece. The transaction, without knowing how much the investor initially paid to purchase the July $130 strike calls, results in a net profit of $1.80 per contract. The new long call stance prepares the responsible party to accrue added profits if NFLX shares surge 5.6% over today’s high of $127.80 to exceed $135.00 ahead of July expiration.

DV – DeVry, Inc. – Shares of the owner and operator of for-profit schools and colleges slipped slightly lower by 0.05% to stand at $57.02 by 12:50 pm (ET). DeVry popped up on our ‘hot by options volume’ market scanner in the first half of the trading session due to bearish put buying activity in the July contract. Investors bracing for continued erosion in the price of DeVry’s shares picked up at least 3,100 puts at the July $50 strike for an average premium of $0.86 per contract. Put players are poised to profit should shares of the underlying stock plummet 13.8% to trade beneath the average breakeven price of $49.14 by July expiration.

MTB – M&T Bank Corp. – Speculation surrounding ‘talks’ between MTB and Spain’s Santander to merge Santander’s U.S. operations with M&T Bank Corp. inspired frenzied call activity on the Buffalo, New York-based bank holding company and drove its shares up as much as 9.85% to an intraday high of $90.00. Bulls are positioning for continued appreciation in MTB’s shares in case there turns out to be truth to the unconfirmed rumors flying around town. Investors purchased at least 4,000 calls at the June $90 strike for an average premium of $0.61 per contract. Call buyers at this strike price make money only if shares of the underlying stock trade above $90.61 ahead of expiration tomorrow. More than 7,700 calls changed hands at the June $90 strike versus previously existing open interest of just 615 contracts. Call buying also took place at the July $90 strike where some 1,100 calls were picked up for an average premium of $3.25 per contract. Just 24 hours ago, the same July $90 strike call options cost a maximum of $0.75 per contract. Finally, other bullish players purchased approximately 1,900 calls at the higher July $95 strike for an average premium of $1.43 per contract. Investors long these higher-strike calls profit only if shares of MTB rally 7.14% over today’s intraday high of $90.00 to surpass the average breakeven point on the calls at $96.43 by expiration day next month. The demand for call options on MTB coupled with rampant speculation lifted MTB’s overall reading of options implied volatility 12% to 42.31% by 11:47 am (ET).

SWY – Safeway, Inc. – Shares of the North American food and drug retailer are up 1.35% to stand at $21.57 as of 11:00 am (ET) after earlier rallying nearly 3.4% at the start of the trading session to touch an intraday high of $22.00. Bullish options traders burst straight out of the gate this morning to pick up call options in the July and September contracts. One optimistic individual purchased 2,000 calls at the July $22.5 strike for an average premium of $0.375 apiece. The plain-vanilla call buyer is prepared to make money on the acquisition as long as Safeway’s shares rally 6.05% from the current price of $21.57 and trade above the effective breakeven price of $22.875 by expiration day next month. Buying interest spread to the September $22.5 strike where it looks like one investor shelled out $1.00 per contract to take ownership of 1,000 call options. The individual responsible for the purchase profits only if the price of the underlying shares rises 8.95% to exceed the breakeven price of $23.50 by September expiration. The jump in demand for call options on Safeway, Inc. lifted the stock’s overall reading of options implied volatility 7.7% to 27.16% by 11:05 am (ET).

SNE – Sony Corp. – The manufacturer of consumer electronics attracted the attention of bears in morning trading with the price of its shares edging 0.20% lower to $28.27 just after 11:20 am (ET). Pessimistic options players appear to be bracing for continue erosion in the price of the underlying stock by purchasing 2,000 puts at the October $27.5 strike for an average premium of $2.07 apiece. Investors long the puts make money if Sony’s shares plunge 10% from the current price to breach the average breakeven point to the downside at $25.43 by expiration day in October. The electronics maker’s shares have take a beating over the past couple of months and are currently trading 30.1% lower than its 52-week high of $40.45 attained on March 23, 2010. The put buying interest observed on the stock today suggests investors see the Sony’s shares heading further south. Although, Sony’s shares have not traded below the average breakeven price of $25.43 since July 29, 2009.


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