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Buy-Write Strategist Sinks Teeth into Apple Call Options

Today’s tickers: AAPL, AUXL, CSX, CTRP, SNDK, CPB & SLV

AAPL – Apple, Inc. – Options investors fluttered about the iPhone maker today populating the stock with various trading strategies and exchanged more than 234,000 contracts on the stock by 3:40 pm (ET). Apple’s shares are up 0.40% to stand at $247.95 with the final bell set to ring in approximately 15 minutes, but earlier in the session the stock rallied as much as 2.37% to touch an intraday high of $252.80. One strategist expecting the price of the underlying stock to increase sharply ahead of July 16 expiration day initiated a buy-write transaction today. It looks like the investor sold roughly 1,300 calls at the July $280 strike for an average premium of $6.00 apiece and simultaneously purchased Apple shares at an average price of $251.90 each. The premium received for writing the call options effectively reduces the average price paid to purchase shares of the underlying stock to $245.90 apiece. Thus, the covered call strategy positions the investor to walk away with maximum gains of 13.87% should Apple’s shares trade above $280.00 at expiration. Shares of the iPad manufacturer have not exceeded $279.01 in the past 52-weeks. But, the bullish player certainly reduced the cost of getting long Apple shares and is positioned to benefit nicely from upward momentum in the price of the underlying stock whether or not shares are called from him at expiration day in July.

AUXL – Auxilium Pharmaceuticals, Inc. – Shares of the specialty biopharmaceutical company fell as much as 6.85% during the trading session to attain a new 52-week low of $19.99. AUXL’s shares declined following a downgrade to ‘perform’ from ‘outperform’ at Oppenheimer this morning, and are currently down 4.3% to close the trading day at $20.54. The decline in Auxilium’s shares today inspired one options investor to purchase a plain-vanilla debit put spread on the stock. The trader purchased 2,000 now deep in-the-money puts at the July $22.5 strike for a premium of $2.85 apiece, spread against the sale of the same number of puts at the lower July $20 strike for a premium of $1.20 each. The net cost of the transaction amounts to $1.65 per contract, thus positioning the bearish player to accrue maximum potential profits of $0.85 per contract if shares of the underlying stock trade below $20.00 by July expiration day.

CSX – CSX Corp. – The provider of rail-based transportation services popped up on our ‘most active by options volume’ market scanner during the first half of the trading session due to bullish trading activity in the July contract. CSX Corp.’s shares are currently up 0.65% at $48.01 as of 1:05 pm (ET), but at least one options investor is positioning for the price of the underlying stock to appreciate significantly ahead of July expiration day. It looks like approximately 7,500 call options were picked up at the July $50 strike for an average premium of $1.15 per contract. Investors long the calls stand ready to amass profits should CSX shares surge 6.55% over the current price of $48.01 to surpass the effective breakeven price of $51.15 ahead of expiration in July. Call buyers populating the stock today are perhaps preparing for the price of CSX Corp.’s shares, and premium on the July $50 strike calls, to increase following the firm’s second-quarter earnings report slated for release after the closing bell on July 12, 2010. Options players exchanged more than 8,900 call options at the July $50 strike by 1:10 pm (ET).

CTRP – CTrip.com International, Ltd. – Shares of the consolidator of hotel accommodations and airline tickets in China fell as much as 17.65% during the first half of the trading session to touch down at an intraday low of $31.35. Today’s low point of $31.35 for CTRP shares marks an overall 42.3% decline in the price of the stock in just over two weeks time since shares touched an intraday high of $47.01 on June 21, 2010. Shares declined recently on news airlines in China plan to cut commission rates for some domestic flights. The price of the underlying stock was also helped lower by a host of analyst downgrades such as the cut to ‘hold’ from ‘buy’ with a 12-month target price of $42.00 at Deutsche Bank on June 29. Bearish investors dominated the options playing field on CTrip.com International today with call selling and put buying taking place in the July and August contracts. Pessimistic players expecting shares to continue lower ahead of July expiration picked up roughly 800 puts at the July $25 strike for an average premium of $0.15 apiece. Buying interest spread to the higher July $30 strike where 1,200 put options were purchased for an average premium of $0.76 each. Investors long the July $30 strike puts make money if CTRP’s shares decline another 6.7% from today’s low of $31.35 to breach the average breakeven point to the downside at $29.24 by July expiration day. Bearish individuals holding out little hope for a near-term rebound in CTRP’s shares shed 1,000 calls at the July $32 strike to pocket an average premium of $1.83 apiece. Call sellers at this strike keep the full premium received on the transaction as long as shares fail to rally above $32.00 by July expiration. Another 1,000 calls were sold at the higher July $37 strike for an average premium of $0.43 each. Finally, pessimists picked up 1,000 bearish put options at the August $25 strike for a volume-weighted average premium of $0.85 a-pop. Investors long the puts at this strike price accrue profits if, by August expiration, shares of the underlying stock fall another 23% from today’s low to breach the average breakeven point at $24.15. Rapid erosion in CTRP’s shares and greater demand for options on the stock boosted the overall reading of options implied volatility on CTrip.com 17% to 70.73% by 12:50 pm (ET).

SNDK – SanDisk Corp. – Options traders with long-term bullish views on SanDisk Corp. sold in- and out-of-the-money put options in the October and January 2011 contracts this morning with shares of the underlying stock rallying 3.00% to $42.71 by 11:40 am (ET). Investors expecting SanDisk’s shares to continue to climb in the next several months sold 1,000 puts at the October $42 strike to pocket an average premium of $5.025 apiece. Put sellers keep the full premium received today as long as the price of SanDisk’s shares exceeds $42.00 through October expiration day. Optimism spread to the higher October $43 strike where 1,000 in-the-money puts were sold at a premium of $5.50 each. Investors short the October $43 strike puts walk away with the full premium pocketed today if shares are trading above $43.00 ahead of expiration. Another optimistic options player anticipating sharp share price appreciation for SanDisk sold 1,200 deep in-the-money puts at the January 2011 $47 strike to take in a premium of $9.75 per contract. The trader responsible for this transaction keeps the full premium received if SNDK’s shares rally at least 10.00% to trade above $47.00 by expiration day in January 2011. Investors short the puts are apparently happy to have shares of the underlying stock put to them should the puts land in-the-money by expiration day. Traders selling the October $42 and October $43 strike puts could have shares put to them at $36.975 and $37.50, respectively, while the investor selling the January 2011 $47 strike puts may have shares put to him at an effective price of $37.25 each.

CPB – Campbell Soup Co. – Bullish options investors are scooping up out-of-the-money call options on the global manufacturer and marketer of convenience food products this morning with shares of the underlying stock up more than 1.25% to arrive at $35.76 as of 11:15 am (ET). CPB was rated new ‘hold’ at Keybanc Capital Markets today. Traders expecting Campbell’s shares to continue to appreciate during the next five months to expiration purchased approximately 5,400 calls at the November $40 strike for a premium of $0.40 per contract. Call buyers are poised to profit should the food maker’s shares jump 13.00% over the current price of $35.76 to surpass the effective breakeven point to the upside at $40.40 by November expiration day. The majority of the 6,417 lots of previously existing call open interest at the November $40 strike were likely purchased back on April 12, 2010. Thus, investors buying calls at that strike today appear to be augmenting bullish stances on Campbell Soup Co. Options traders exchanged 6,130 calls at the November $40 strike as of 11:25 am (ET).

SLV – iShares Silver Trust ETF – Shares of the SLV, an exchange-traded fund designed to reflect the price of silver owned by the Trust, slipped 0.50% lower in the first half of the trading day to stand at $17.37 just before 11:30 am (ET). Pessimistic options players anticipating continued erosion in the price of the underlying fund purchased roughly 15,800 puts at the August $15 strike for an average premium of $0.16 per contract. Put buyers make money if shares of the ETF plunge 14.6% from the current price of $17.37 to breach the average breakeven point on the puts at $14.84 ahead of August expiration. The majority of the 25,812 lots of put open interest at that strike price appear to be long put positions established, perhaps, by like-minded bearish traders expecting shares of the SLV to head lower by expiration day next month.


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  1. Regarding AAPL did you mean August $280 ?????


  2. andrew, when you write this- "sold 1300 calls at July 280 strike for avg prem of 6.00", I assume that you mean 13 contracts, since 13 contracts would translate into 1300 shares or calls ( 13 x 100) for which you would get 6.00 apiece for. 
     
    Apple, Inc. – Options investors fluttered about the iPhone maker today populating the stock with various trading strategies and exchanged more than 234,000 contracts on the stock by 3:40 pm (ET). Apple’s shares are up 0.40% to stand at $247.95 with the final bell set to ring in approximately 15 minutes, but earlier in the session the stock rallied as much as 2.37% to touch an intraday high of $252.80. One strategist expecting the price of the underlying stock to increase sharply ahead of July 16 expiration day initiated a buy-write transaction today. It looks like the investor sold roughly 1,300 calls at the July $280 strike for an average premium of $6.00 apiece