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Thursday, February 29, 2024

MAKO Options Volume Spikes As Shares Slide


Today’s tickers: MAKO, V & DF

MAKO – MAKO Surgical Corp. – Options on medical device maker, MAKO Surgical Corp., are more active than usual today after the company said it experienced lower than expected growth in the first half of 2012 and lowered its sales forecast for the RIO® robotic arm orthopedic system to 42 to 48 systems from prior guidance of 52 to 58 systems for the full year. Shares in MAKO sold off sharply on the news, dropping more than 40% in early trading to a new 52-week low of $14.625. The company is scheduled to report second-quarter earnings after the close on August 6th. Options volume on MAKO is approaching 25,000 contracts as of 11:15 a.m. in New York versus the stock’s average daily options volume of 3,988 contracts. Some strategies in play this morning suggest the stock may have sold off a bit too hard, with light call buying in the July and August expiries looking for the stock to rebound somewhat in the near term. Additionally, put sellers populating the stock appear to be betting shares are unlikely to hit fresh lows from here in the near future. Traders eyeing the potential for share price improvement in the next couple of weeks snapped up July $15 and $17.5 strike calls at average premiums of $1.03 and $0.25 apiece, respectively. Call buying spread to the Aug. $15, $17.5 and $20 strikes, as well. Meanwhile, put sellers fetched an average premium of $0.85 for the July $15 strike contracts and $0.70 apiece on the sale of Aug. $12.5 strike puts. Traders selling put options on the medical device maker walk away with premium in hand as long as shares in MAKO exceed the strike prices described through expiration.

V – Visa, Inc. – Shares in Visa, down 0.60% at $122.92 today but up nearly 20% year-to-date, have held up well so far in 2012 in the face of concerns ranging from the health of European economies to the slowdown in U.S. consumer spending and weaker data out of China. Options activity on Visa this morning suggests one or more traders expect the stock to continue to retain much of the year’s gains through July expiration. Volume in Visa options is greatest at the July 20 ‘12 $120 strike where more than 5,300 puts changed hands versus open interest of 2,395 contracts in the first half of the trading day. It looks like most of the puts were sold for a premium of $0.80 apiece, which put sellers keep in full as long as Visa’s shares exceed $120.00 at July expiration. The strategy could force sellers of the options to take delivery of shares in the financial technology company at an effective price of $119.20 each in the event the put options land in-the-money at expiration next week. The July expiry put options expire the week prior to Visa’s third-quarter earnings report on July 25th.

DF – Dean Foods Co. – Traders breakfasting on Dean Foods call options this morning appear to be gunning for fresh 52-week highs in shares of the food products company in the near term. The stock is up 2% just before midday on the East Coast to stand at $16.21. Call buyers looked to the August and September expiries in the first few minutes of the trading day, snapping up 190 of the Aug. $17 strike calls for a premium of $0.55 each, and purchasing 500 of the Sept. $18 strike calls at a premium of $0.45 apiece. The call options provide upside exposure to the stock leading up to Dean Foods Co.’s second-quarter earnings report on the first of August. Strategists long call options expiring next month may profit in the event DF’s shares rally another 8.3% to settle above $17.55. The higher Sept. $18 strike calls make money as long as shares in the milk producer surge 13.8% over the current price of $16.21 to surpass the effective breakeven price of $18.45 by expiration.


Caitlin Duffy

Equity Options Analyst

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