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Friday, April 12, 2024

Bears Mine For Put Options On Agnico-Eagle As Shares Nosedive

Today’s tickers: AEM, ANF, LEN & ALTR

AEM – Agnico-Eagle Mines Ltd. – News that Agnico-Eagle Mines indefinitely suspended operations at its Goldex mine in Quebec took the luster out of shares in the gold mining company today. The stock fell nearly 20.0% to a multi-year low of $45.78 at its lowest point of the session. Some options traders are positioning for the stock to look even more tarnished by the end of the week. Meanwhile, demand for longer-dated put options on Agnico-Eagle Mines suggests the shares may remain under pressure through AEM’s third-quarter earnings release next Wednesday, for the remainder of 2011, and into the New Year.

Near-term bears jockeyed for put options in the October contract. The Oct. $45 and $47.5 strikes are two of the most active, with the majority of positions in each largely initiated by buyers. Traders exchanged roughly 1,400 in-the-money puts at the Oct. $47.5 strike against open interest of 317 contracts. These contracts were purchased roughly 930 times for an average premium of $0.89 a-pop. Investors long the puts may profit if shares in AEM trade below the average breakeven price of $46.61 at expiration later this week. The Oct. $45 strike put is the most active in the front month, with more than 2,100 of the contracts in play against open interest of 578 lots. Investors purchased most of the put options for an average premium of $0.55 each, and may make money on the bearish position in the event that shares in the gold mining company slip beneath the average breakeven point at $44.45 by expiration day.

Buyers of November contract put options at the $40, $35 and $32.5 strikes may see the value of their deep out-of-the-money options rally should the company’s third-quarter earnings or forward guidance disappoint. Finally, longer-term pessimism cropped up in the Jan. 2012 $45 strike put where some 1,700 contracts were purchased for an average premium of $3.78 apiece. The investor or investors holding the put options may profit at expiration next year if shares in AEM slide 10.0% off today’s low of $45.78 to breach the average breakeven point on the downside at $41.22. Shares in Agnico-Eagle Mines last traded below $41.22 back in December 2008. The overall reading of options implied volatility on the stock popped up 26.7% to 57.2% in the first half of the session.

ANF – Abercrombie & Fitch Co. – Sizable prints in Abercrombie & Fitch Co. put options may be one investor’s look to position for bearish movement in the price of the underlying in the aftermath of the retailer’s third-quarter earnings report on November 16. Shares in ANF fell 2.05% to $68.92 by midday on the East Coast. Earlier in the week, the provider of apparel and accessories for tweens, teens and adults, was rated new ‘Outperform’ with a 12-month share price target of $85.00 at Macquarie Research.

Nearly all of the activity in Abercrombie options today is wrapped up in a large debit put spread, which may yield maximum profits to its owner in the event of substantial declines in the price of the shares within the next four weeks. The investor responsible for the transaction appears to have purchased roughly 8,000 in-the-money puts at the Nov. $70 strike for an average premium of $4.26 each, and sold around the same number of puts at the lower Nov. $60 strike at an average premium of $1.13 apiece. Net premium paid to initiate the spread amounts to $3.13 per contract, thus preparing the options player to profit should shares in ANF decline another 3.0% to breach the average breakeven price of $66.87. The put spreader may walk away with maximum potential profits of $6.87 per contract if Abercrombie’s shares plunge 13.0% to trade below $60.00 at expiration next month. Options implied volatility on the stock is running 5.8% higher in early-afternoon trade to stand at 54.6% as of 12:10 pm in New York.

LEN – Lennar Corp. – Activity in Lennar Corp. call options this morning suggests at least one options strategist is optimistic the homebuilding company’s shares will improve over the next seven months. Shares in the Miami, Florida-based homebuilder slipped 1.3% to $15.71 just before 12:30 pm in New York, reversing gains enjoyed earlier in the session on the heels of a reported jump in U.S. housing starts. More than 6,100 calls changed hands at the May $20 strike against paltry previously existing open interest of just 23 contracts. The largest single transaction at that strike was the purchase of a block of 3,000 calls at a premium of $1.15 apiece, initiated less than 15 minutes after the opening bell. The investor may profit at expiration in May if shares in Lennar Corp. jump 34.6% over the current price of $15.71 to surpass the effective breakeven price of $21.15. Time and sales data on the calls suggests some 5,750 of the contracts, including the block of 3,000, exchanged at the May $20 strike, were purchased at a volume-weighted average price of $1.13 a-pop. Lennar Corp. shares last traded above $20.00 in March 2011.

ALTR – Altera Corp. – Shares in the chip maker fell 3.5% to $33.85 this afternoon, and fresh put buying in the front month suggests the stock may extend losses through the end of this week. Bearish plays in Altera Corp. options may be profitable propositions for some traders if the company fails to meet or exceed third-quarter earnings estimates when it reports after the final bell tomorrow. The stock presently trades at more than 30.0% discount to its April 29, 52-week high of $49.59. Trading traffic in Altera Corp. puts is most active at the Oct. $33 strike, where more than 4,100 contracts changed hands against 1,527 open positions. It looks like most of the puts were purchased for an average premium of $0.55 a-pop in the early hours of the trading session. Investors long the puts may profit at expiration day if shares in ALTR decline another 4.1% from the current price of $33.85 to breach the average breakeven point on the downside at $32.45. Shares in Altera Corp. had been as low as $30.38 as recently as October 4.

Caitlin Duffy
Equity Options Analyst

 

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