Pessimist Plants Put Spread on Comerica Inc.
by Option Review - August 6th, 2010 4:08 pm
Today’s tickers: CMA, CSCO, ATHN, FIG, CYD, CROX & NUAN
CMA – Comerica Inc. – The financial services firm’s shares declined as much as 4.8% today to touch down at an intraday low of $36.38. One options investor expecting Comerica’s shares to continue to head south ahead of October expiration purchased a plain-vanilla debit put spread. Shares are currently down 3.65% on the day to arrive at $36.82 just before 2:45 pm ET. The bearish player purchased 5,000 puts at the October $36 strike for an average premium of $2.05 per contract, and sold the same number of puts at the lower October $30 strike for an average premium of $0.50 apiece. The net cost of buying the spread amounts to $1.55 per contract. Thus, the investor responsible for initiating the transaction is poised to profit should CMA’s shares fall another 6.4% from the current price of $36.82 to trade below the effective breakeven point at $34.45 by expiration day. Maximum potential profits of $4.45 per contract pad the investor’s wallet if Comerica’s shares plummet 18.5% to slip beneath $30.00 by expiration in October. The surge in demand for options on the stock helped lift the overall reading of options implied volatility on CMA 9.1% to 34.00% this afternoon.
CSCO – Cisco Systems, Inc. – Wary options players are scooping up put options on the maker of switches and routers today with shares of the underlying stock trading lower by 0.95% to stand at $23.94 in late afternoon trading. Investors expecting to see Cisco’s shares decline following the firm’s fourth-quarter earnings report, scheduled for release after the closing bell on August 11, opted to purchase weekly put options expiring on August 13. Traders bought approximately 6,800 put options at the August $23 strike for an average premium of $0.26 apiece. Put buyers make money as long as Cisco’s shares fall another 5.00% from the current price of $23.94 to trade below the average breakeven point to the downside at $22.74 by expiration day.
ATHN – Athena Health, Inc. – Shares of the provider of Internet-based business services for physician practices fell as much as 4.00% today to an intraday low of $25.18. Today’s low point in ATHN shares marks an 11.025% decline in the price of the underlying stock since Monday when shares touched an intraday high of $28.30. Athena Health appeared on our scanners today after one bearish options…
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JPMorgan-Bull Constructs Three-Legged Combo Play as Shares Rise
by Option Review - January 5th, 2010 4:31 pm
Today’s tickers: JPM, LVS, S, WFC, UAUA, NBR, PTEN, FIG, PCS, DAL & TPX
JPM – JPMorgan Chase & Co. – A three-legged combination play suggests one investor anticipates a significant rally in JPMorgan’s shares within the next few months. The stock is trading 2% higher this afternoon to $43.65. The trader utilized both calls and puts in the March contract in order to position for potential bullish movement in shares of the underlying. The investor sold 15,000 puts at the March 40 strike for an average premium of 1.18 apiece to partially offset the cost of buying a call spread. The call spread involved the purchase of 15,000 calls at the now in-the-money March 43 strike for an average premium of 2.58 each, marked against the sale of 15,000 calls at the higher March 47 strike for 90 cents premium apiece. The net cost of the three-legged strategy amounts to 90 cents per contract. Maximum potential profits of 3.50 per contract – a grand total of $5.25 million – are available to the investor if JPM’s shares rally through $47.00 by expiration day. Profits amass above the breakeven price of $43.50. The short put stance at the March 40 strike implies the investor is willing to have shares put to him at $40.00 apiece if the put options land in-the-money.
LVS – Las Vegas Sands Corp. – Reports of a large 48% increase in December revenue at Sands China – the Macau unit of Las Vegas Sands Corp. – pushed shares of LVS up 9.5% to $18.21 today. Option bulls, hoping good fortune and accurate foresight are on their side looked to the February contract to initiate plain-vanilla call buying strategies. The now in-the-money February 18 strike had roughly 2,700 calls picked up for an average premium of 1.29 apiece. The higher February 19 strike was the hot spot for bulls looking to bet on an LVS rally. Out of the 19,500 calls traded at that strike, more than 12,200 contracts were purchased for about one dollar per contract. Call options exchanged at the February 19 strike vastly outnumber previously existing open interest at that strike of just 2,725 lots. The higher February 20 strike received bullish interest as well, with about 2,000 contracts coveted by traders for an average premium of 66 cents each. As of 3:15 pm (EDT), investors traded just under 127,000 option contracts of LVS,…
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Friday Already?
by phil - May 22nd, 2009 8:29 am
Man what a fun week, I can't believe it's ending so soon!
We are already on vacation, having followed our plan to cash out at the bottom yesterday anticipating some short covering today that would take up the markets. Actually, we took some bullish plays into yesterday's close as it was such an obvious set-up for a stick save and there was so much bad news out already that we weren't too worried about more. My hot streak continued as I posted to members at 11:13, with the Dow on the rise at 8,267: "OIH now at the 5% rule (94) and XLE at -4% (47.50 is 5%) and Nas at 2.5% rule (1,685) along with RUT (477) while S&P needs 880, Dow needs 8,220, and NYSE 5,725. Those are the points that should hold and bounce us at least back to -2% but, after the way they behaved at 1.5%, we need to see them retake -1.25 before we’re even slightly safe."
The Nas bottomed out at 1,678 at 2:45 but came back 20 points to -1.89%, the Russell hit 474 at the same time but finishe down 1.66%, the S&P hit 880 on the nose at 2:53 before recovering to -1.68%, the Dow hit 8,224 at 2:52 but rallied back to down 1.54% and the NYSE bottomed out at 5,728 at 2:58 before making it back to -1.53. Now I know there are lots of stock services that can tell you exactly what the market will do for the day 3 days in a row and I'm certain that there's no way to profit from that kind of information anyway so, whatever you do – don't sign up for this service (see, we are cleverly experimenting with reverse psychology!). We took quick profits on our DIA calls into the close but left our DDM (ultra-long Dow) calls on for fun and they should get a nice pop this morning. We also couldn't resist some great buy opportunities during that sell-off and we picked up new, hedged positions in HMY, FIG, DRYS, RF, DAL and UYG in addition to our Dow plays. As we also sold the Dow puts to cover our longer covers – we ended up pretty darned bullish after being 100% bearish at the open. We are flexible if nothing else!
Our futures are looking pretty good this morning despite BKUNA being siezed by…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.