Option Strategies and Spreads Suggest Good Times on the Horizon for JPMorgan
by Option Review - February 5th, 2011 4:02 am
Today’s tickers: JPM, GG, CVA & RSH
JPM - JPMorgan Chase & Co. – Bullish sentiment on JPMorgan is alive, well and flourishing by the looks of transactions taking place in April contract call and put options this afternoon. Shares in the name are down 1.7% at $44.69 as of 1:00pm in New York, but some strategists are positioning for the stock to rally during the next few months. JPM-bulls are taking advantage of the dip in the price of the underlying, and seem little concerned the latest buzz regarding a lawsuit filed in December of last year, alleging the company knew of, but failed to report, fraudulent activity perpetrated by Bernard Madoff. A three-legged transaction involving the sale of 4,500 April $52 strike puts and the sale of the same number of April $49 strike calls, reduced the cost of buying 4,500 calls at the April $45 strike to just $0.27 per contract. The investor responsible for the transaction starts to make money if shares in the financial services firm rise 1.3% to surpass the effective breakeven price of $45.27 ahead of April expiration. Maximum potential profits of $3.73 per contract are available to the trader in the event that JPM’s shares surge 9.6% in the next three months to trade above $49.00 by expiration day. Meanwhile, it looks like other bulls are buying the April $46/$49 call spread, around 9,000 times, for an average premium of $1.11 per contract. Debit call-spreaders stand prepared to profit should shares increase 5.4% to trade above the average breakeven share price of $47.11 before the calls expire in April. Investors could walk away with maximum potential profits of $1.89 per contract if the price of the underlying stock jumps 9.6% to exceed $49.00 by April expiration day.
GG - Goldcorp, Inc. – Investors placed medium-term bullish bets on the gold producer today in order to position for significant appreciation in the price of the underlying stock over the next few months. Shares in the gold mining company pared…
Emerging Markets Bear With Butterfly Wings Dominates EEM Puts In Afternoon Trading
by Option Review - May 24th, 2010 4:32 pm
Today’s tickers: EEM, ETFC, CVA, CSCO, CMCSK, XLI, CATM, AXL & ASML
EEM – iShares MSCI Emerging Markets Index ETF – An enormous bearish put butterfly spread comprised of 240,000 put options cast a gloomy shadow over the emerging markets fund late in afternoon trading. Shares of the EEM, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the MSCI Emerging Markets Index – an index created to measure equity market performance in the global emerging markets, are down 0.35% at $37.21 as of 3:30 pm (ET). The massive bearish transaction on the fund suggests one big player is bracing for a potential 19% pullback in the price of the underlying shares by June expiration. The butterfly spread spans the June $25/$30/$35 strikes, with 60,000 puts picked up at the June $25 strike for a premium of $0.11 each [wing 1] and another 60,000 puts purchased at the higher June $35 strike for a premium of $0.88 apiece [wing 2]. The body of the butterfly involved the sale of 120,000 puts at the central June $30 strike for a premium of $0.27 a-pop. The net cost of the spread amounts to $0.45 per contract. The EEM’s shares must slip beneath the upper breakeven price of $34.55 before the investor starts to make money ahead of June expiration. Maximum available profits of $4.55 per contract pad the investor’s wallet if shares of the underlying fund fall 19.35% from the current price to settle at $30.00 at expiration. Shares of the EEM last traded below $34.55 back on August 19, 2009, and touched a 52-week low of $30.12 back on June 23, 2009. The investor responsible for the giant transaction only ever risks losing $0.45 per contract, but stands ready to amass more than 10 times that amount – $4.55 per contract – if shares nose-dive down to $30.00 ahead of expiration day next month.
ETFC – E*Trade Financial Corp. – A massive three-legged options combination play initiated on financial services firm, E*Trade Financial Corp., suggests one investor sees shares of the provider of online brokerage services trading within a narrow range through expiration in January 2011. ETFC shares are up 2.05% at $1.49 as of 2:30 pm (ET). The big options player initiated a sold strangle, selling 30,000 calls at the January 2011 $2.0 strike for $0.21 apiece and shedding 30,000 puts at…