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Visa, Inc. Call Options Fly Off the Shelves

Today’s tickers: V, AXP, GIS, HNZ, AFFY, REV, AA & ORCL

V – Visa, Inc. – Frenzied call buying ensued on global payments network, Visa, Inc., this afternoon with the price of the underlying shares rallying as much as 8.76% to secure an intraday high of $83.79. Visa’s shares are currently up a more modest 4.90% to stand at $80.82 as of 3:10 pm (ET). The sharp rally in Visa’s share price likely stems from news that U.S. politicians reached an agreement on the regulation of interchange/”swipe” fees on credit and debit card transactions. Investors flooded the near-term July contract on Visa, Inc. to initiate bullish stances on the stock. Options traders expecting continued upward movement in the price of Visa’s shares by July expiration picked up approximately 6,800 calls at the July $85 strike for an average premium of $1.41 each. Investors long the July $85 strike calls make money only if shares of the underlying stock trade above $86.41 ahead of expiration day next month. Buying interest spread to the higher July $90 strike where some 4,300 calls were purchased at an average premium of $0.46 each. Call buyers at this strike price accrue profits if the firm’s shares surge 11.9% from the current price of $80.82 to trade above the average breakeven point to the upside at $90.46 by July expiration day. Finally, investors honed in on the July $95 strike to take ownership of 1,300 calls for an average premium of $0.19 per contract. Options players populating Visa, Inc. this afternoon displayed a clear preference for bullish calls on the stock by exchanging more than 2.3 call options to each single put contract in play thus far in the session. But, some optimistic individuals utilized puts to take a near-term bullish stance on Visa. Investors sold at least 1,400 puts at the July $80 strike to receive an average premium of $2.81 per contract. Put sellers keep the full premium pocketed on the transaction as long as Visa’s shares exceed $80.00 through expiration day next month. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $77.19 each in the event the puts land in-the-money at expiration.

AXP – American Express Co. – The global payments company appeared on our ‘most active by options volume’ market scanner this afternoon after one options strategist initiated a bearish put butterfly spread in the July contract. AXP’s shares are up 1.65% to $42.73 as of 2:45 pm (ET). The investor responsible for enacting the butterfly spread is perhaps positioning for AXP shares to decline should items in the final version of the regulatory overhaul bill prove detrimental to the firm. The options player appears to have purchased 3,500 puts at the July $30 strike for a premium of $0.09 apiece [wing 1] and purchased another 3,500 puts at the higher July $40 strike for an average premium of $0.57 each [wing 2]. The body of the butterfly centered at the July $35 strike where 7,000 puts were sold at a premium of $0.16 a-pop. The net cost of the spread amounts to $0.34 per contract. The investor loses the full amount of premium paid per contract if American Express shares trade above $40.00 through July expiration. However, the parameters of the transaction indicate the trader accrues maximum potential profits of $4.66 per contract if the price of the underlying stock falls 18% to settle at $35.00 at expiration. AXP’s shares must decline at least 7.2% from the current price of $42.73 before the butterfly-spreader starts to make money beneath the upper breakeven price of $39.66.

GIS – General Mills, Inc. – Put buying bears flooded the options field on the global manufacturer and marketer of branded consumer foods this afternoon with shares of the underlying stock down 1.30% to stand at $38.04 just after 3:00 pm (ET). Pessimistic players picked up approximately 7,800 puts at the July $37.5 strike by paying an average premium of $0.68 per contract. Investors long the July $37.5 strike put options are positioned to profit should General Mills’ shares fall another 3.2% to trade below the average breakeven point to the downside at $36.82 by July expiration day. Bearish sentiment spread to the August $37.5 strike where some 2,100 puts were purchased at an average premium of $1.12 each. Investors anticipating more significant erosion in the price of the underlying shares by August expiration coveted roughly 8,100 puts at the August $35 strike for an average premium of $0.43 apiece. Put players holding the August $35 strike contracts make money if GIS shares plunge 9.1% to breach the average breakeven point on the puts at $34.57 by expiration day in August. The surge in demand for options on the food manufacturer lifted the stock’s overall reading of options implied volatility 16% to 22.31% in afternoon trading.

HNZ – H.J. Heinz Co. – Shares of the world’s biggest ketchup maker are lower by 0.80% to $45.88 in late afternoon trading after the firm revealed plans to purchase Chinese soy-sauce manufacturer, Foodstar. News of the proposed acquisition perhaps emboldened bullish options investors observed utilizing call options to position for significant appreciation in the price of the underlying stock by September expiration. Optimistic options players purchased approximately 3,100 calls at the September $50 strike for an average premium of $0.30 per contract. Investors long the calls are prepared to profit should the ketchup manufacturer’s shares surge 9.6% to surpass the average breakeven price of $50.30 by expiration day in September. Increased demand for options on HNZ and news of the Foodstar acquisition lifted the stock’s overall reading of options implied volatility 10.3% to 16.90% by 3:30 pm (ET).

AFFY – Affymax, Inc. – Shares of the biopharmaceutical company plunged 68.7% to an intraday low of $7.20 today after data showed that non-dialysis patients taking Affymax’s anemia drug, Hematide, have a higher rate of heart attacks, chest pain, heart failure, arrhythmia, strokes and death than patients taking a similar drug made by Amgen Inc. The Hematide safety concerns inspired a downgrade of Affymax to ‘underperform’ from ‘outperform’ with a 12-month target share price of $7.00 by an analyst at RBC Capital this morning. Bearish options investors populating AFFY today initiated trades implying the price of the underlying stock will not recover in the next several months. Pessimistic players sold short roughly 2,800 calls at the July $10 strike to pocket an average premium of $0.37 apiece. Investors short the calls keep the full $0.37 premium received today as long as Affymax’s shares trade below $10.00 through July expiration. Call-selling spread to the October $10 strike where approximately 1,600 calls were shed for an average premium of $0.80 per contract. Investors keep the full $0.80 premium per contract if shares of the underlying stock fail to rally above $10.00 ahead of October expiration.

REV – Revlon, Inc. – The manufacturer of an array of cosmetics, beauty tools, fragrances, skincare and other personal care products appeared on our ‘hot by options volume’ market scanner in the first half of the trading session after one options investor initiated a bullish transaction on the stock. Revlon’s shares are currently lower by 0.15% to $12.83 as of 12:27 pm (ET), but shares rallied as much as 2.80% at the start of the trading day to reach an intraday high of $13.21. One long-term bullish individual appears to have purchased a plain-vanilla debit call spread, buying 3,600 calls at the November $17.5 strike for a premium of $1.30 apiece, and selling the same number of calls at the higher November $25 strike for a premium of $0.25 each. The net cost of buying the spread amounts to $1.05 per contract. Thus, the optimistic investor is prepared to profit if Revlon’s shares surge more than 44.5% over the current price to trade above the effective breakeven point on the spread at $18.55 by expiration day. The trader stands ready to accumulate maximum potential profits of $6.45 per contract should the cosmetics maker’s shares jump 95% to trade at or above $25.00 by November expiration. Revlon’s shares have not traded above $25.00 since June 1, 2006.

AA – Alcoa, Inc. – Shares of the aluminum manufacturer are up 8.10% to stand at $12.01 as of 12:15 pm (ET). The rally in the price of the underlying stock inspired bullish call buying across several expiries. Near-term optimists are positioning for continued upward momentum in Alcoa’s shares by purchasing at least 9,400 now in-the-money calls at the July $12 strike for an average premium of $0.41 apiece. Investors buying calls outright at the July $12 strike are prepared to profit if the aluminum maker’s shares gain another 3.33% to trade above the average breakeven price of $12.41 by July expiration day. Bulls also purchased approximately 6,600 calls at the higher July $13 strike for an average premium of $0.17 each. Alcoa’s shares must rally 9.65% from the current price of $12.01 before July $13 strike call buyers make money above the effective breakeven point at $13.17. Finally, the July $14 strike enticed options optimists to purchase roughly 1,000 calls for an average premium of $0.05 each. Call buying behavior spread to the October $14 strike where some 5,300 calls were picked up for an average premium of $0.39 per contract. Investors long the calls make money only if Alcoa’s shares surge 19.8% to trade above the average breakeven price of $14.39 ahead of October expiration.

ORCL – Oracle Corp. – Plain-vanilla call buying activity observed today on software manufacturer, Oracle Corp., suggests some options investors are itching for a sharp rally in the price of the underlying shares by September expiration. Oracle’s shares increased 0.30% to trade at $23.27 as of 12:35 pm (ET). Long-term optimistic individuals picked up roughly 3,200 calls at the September $29 strike for an average premium of $0.04 per contract. Call buyers at this strike price make money only if Oracle’s shares rally 24.8% from the current price of $23.27 to trade above the average breakeven point to the upside at $29.04 by September expiration.


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