Options Suggest Rough Seas Possible For Carnival; Rallies In Sight For Hess, Sunoco
by Option Review - June 13th, 2012 12:51 pm
Today’s tickers: CCL, HES & SUN
CCL - Carnival Corp. – A debit put spread initiated on cruise operator, Carnival Corp., may be a protective strategy or, perhaps, an outright bearish bet that shares in the name will sink following the company’s second-quarter earnings report next Tuesday. Shares in Carnival are up 1.0% at a near six-month high of $34.16 as of 10:50 a.m. ET, bringing the stock’s week-to-date gains up to 8.75%, on optimism slumping oil prices is positive for the cruise industry. It looks like one trader prepared for the shares to potentially reverse gains purchased a 2,000-lot July $30/$32 put spread for a net premium of $0.50 per contract. The position makes money, or provides downside protection, in the event that Carnival’s shares slide 7.8% to breach the effective breakeven price of $31.50. Maximum potential gains available on the spread amount to $1.50 per contract should the price of the stock drop 12.2% to $30.00 within the next five weeks to expiration.
HES - Hess Corp. – The global integrated energy company popped up on our scanners early in the trading session on Wednesday after a sizable three-legged spread was initiated in the November expiry options. It looks like one strategist is selling out-of-the-money puts to reduce the cost of taking a bullish stance on the stock. Shares in Hess are today lower by 0.90% at $43.54 as of 11:30 a.m. in New York. The largest transaction in HES options so far today was constructed with the sale of 2,000 puts at the Nov. $37.5 strike against the purchase of a 2,000-lot Nov. $45/$52.5 call spread done at a net premium outlay of $0.03 per contract. Profits are available on the trade if shares in Hess Corp. rally 3.4% to surpass the effective breakeven point on the upside at $45.03 by expiration. The strategist stands to make as much as $7.47 per contract in the event that HES stock price soars 21.0%…
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Bulls Snap Up Forest Labs Calls, While Bears Take A Shot At Beam
by Option Review - November 22nd, 2011 2:21 pm
Today’s tickers: BEAM, FRX, HES & SMG
BEAM - Beam, Inc. – The bourbon maker’s shares slipped 0.40% to $49.85 in early-afternoon trade, but may not rally much ahead of December expiration, by the looks of call selling in the front month. Though the holiday season, and perhaps market turmoil, may spur some to reach for the Jim Beam bottle or pass the Courvoisier, at least one investor is taking a bearish stance on the liquor producer. It looks like the investor sold more than 660 calls at the Dec. $50 strike to pocket premium of $1.10 apiece. The trader keeps the full amount of premium received as long as shares in Beam, Inc. fail to rally above $50.00 at expiration day next month. If the investor holds no position in the stock, the naked-short stance in calls could result in losses to the upside in the event that BEAM’s shares rally 2.5% over the current price to surpass the upper breakeven point at $51.10 by December expiration. Shares in Beam, Inc. topped $51.10 as recently as November 15, the same day the stock peaked at $51.35, its highest point since the company started trading as BEAM, formerly Fortune Brands (FO), on the New York Stock Exchange.
FRX - Forest Laboratories, Inc. – Shares in the drug maker are up 1.4% at $29.41 this afternoon, and it looks like a number of options traders are positioning for the price of the underlying to extend gains in the next few months. Investors gearing up for a Forest Labs rally exchanged more than 4,400 calls at the Dec. $30 strike against open interest of just 99 contracts. It appears most of the contracts were purchased for an average premium of $0.60 each, by bullish players who may profit at expiration next month should shares in FRX increase another 4.0% to trade above the average breakeven point at $30.60. Call options accumulation spread to the Dec. $31 and $32 strikes, where another 230 and 200 contracts were snapped up at premiums of $0.31 and $0.15 each, respectively. Bullish sentiment on the pharmaceuticals firm spread to the Jan. 2012 $31 strike, where traders picked up 2,100 calls for an average premium of $0.93 a-pop. Investors long the calls make money if shares in Forest Labs surge 8.6% to surpass the average breakeven price of $31.93 at expiration next year. January 2012 contract call options expire several days after…
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Bullish Risk Reversal Player Eyes Hess Corp.
by Option Review - December 23rd, 2010 4:24 pm
Today’s tickers: HES, NOK, AES & NBG
HES - Hess Corp. – The energy company appeared on our scanners this morning after one options strategist initiated a bullish risk reversal in the February 2011 contract. Shares in Hess Corp. are currently down 0.45% to arrive at $75.82 as of 12:40pm. It looks like the investor responsible for the transaction sold 2,500 puts at the February 2011 $65 strike for a premium of $0.53 each, in order to buy the same number of calls at the higher February 2011 $85 strike at a premium of $0.55 apiece. The investor paid a net $0.02 per contract for the risk reversal. This strategy is a far cheaper method of gaining upside exposure for a Hess-bull than buying calls outright. Premium on the calls will appreciate if shares rally sufficiently ahead of expiration day, and the investor may be able to book profits by selling the calls at a higher premium whether or not they land in-the-money. The short stance in puts indicates this individual expects shares to remain above $65.00. He appears to be more than willing to bear the risk of having 250,000 shares of the underlying stock put to him if the puts land in-the-money at expiration because of the cost savings that put selling provides for the bullish stance. Hess Corp. shares are currently trading just below their 52-week high of $76.54, attained during trading on Wednesday. The bullish risk reversal suggests the investor is positioning for Hess Corp.’s shares to hit new highs in the next couple of months to expiration. Shares must rally at least 12.1% over the current price of $75.82 in order for the February 2011 $85 strike calls to land in-the-money before they expire in February.
NOK - Nokia Corp. – Options traders are picking up both call and put options on the mobile telecommunications company today in the February 2011 contract. It looks like investors are expecting shares to move ahead of expiration day in February. Shares in Nokia Corp.…
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New Bank of America CEO Gets Thumbs Up From Investors
by Option Review - January 4th, 2010 4:14 pm
Today’s tickers: BAC, HES, SII & DHI
BAC – Bank of America – A New Year and a fresh start in the corner office for incumbent CEO Brian Moynihan at Bank of America. Comments from his maiden voyage speech at a conference today noted that banks had over lent and consumers had taken on too much debt. It’s time to get back to work and as a responsible lender Mr. Moynihan wants to take the lead and do the right thing. His point that the worst of the crisis is now behind us in the context of credit seems to have been taken to heart by investors surrounding BAC’s shares today lifting it 3.9% to $15.65. Option investors appear to have taken profits on January call options at the $14 and $15 strikes instead favoring the $16/$19 strikes to play a bullish call spread combination. Volume patterns suggest the sale of around 33,000 call options for three cents at the upper strike while the $16 calls appear to have been purchased for around 18 cents thus lowering the breakeven at this point to a further rally of 3.1%. Investors also appeared to sell 22,000 puts expiring this month at the $15 strike – a sustained rally would render these worthless at expiration. Puts expiring February at the same $15 strike were also ditched at a premium of 73 cents, while option implied volatility remained unchanged at 37%.
HES – Hess Corp. – A New Year jump in commodity prices was largely inspired by a sustained bout of cold weather sending crude oil prices on the rise above $80. Shares in oil companies rose with those at Hess up 4% at $62.92, while one long-term option bull appeared to purchase 6,750 bullish call options using the January 2011 expiration. The $75 strike price traded at an average price of $4.60 per contract implying a break even share price at expiration of $79.60, requiring an annual rise for shares at Hess of 26.5% from its current level.
SII – Smith International Inc. – Oil services provider, Smith international is also higher by 2.8% today at $27.92 while our scanners picked up unusual options volume. We’re missing one data point to completely and accurately identify this trading strategy, but we think we get the gist. The option combination involved the purchase of puts expiring in April at the $23 strike where an investor…
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Masco options bearish ahead of earnings
by Option Review - April 27th, 2009 4:41 pm
Today’s tickers: MAS, HES, WHR, ORCL, NVAX, BMRN, TIVO & OI
MAS Masco Corporation – The manufacturer and distributor of home improvement and building products has experienced a share price decline of more than 2% to $9.85 ahead of its earnings report scheduled for release after the market closes today. One option investor took a decidedly bearish stance on the stock by selling short 10,000 calls at the May 10 strike price for an average premium of 69 cents per contract. On the put side, some 2,700 contracts were purchased for an average of 24 cents apiece at the May 7.5 strike price as investors appear to be looking to profit from continued downward movement in shares by expiration in May. In order to profit to the downside, shares would need to continue to fall by another 26% from the current price to breach the breakeven point at $7.26.
HES Hess Corporation – Shares of the global energy company have dipped by more than 3% to $54.34. Despite the share price erosion, option traders have been getting bullish on the stock by jumping into calls in the May contract. The May 65 strike price had more than 6,100 calls purchased for an average premium of 53 cents apiece while the May 70 strike attracted a smaller volume of some 1,800 calls picked up for 30 cents each. We are not certain of the motivation for the increased option activity on the stock today, but we did notice one news report which stated that Credit Suisse posited Hess Corp. was unlikely to be acquired by Exxon. Option implied volatility on the stock jumped as high as 61% today up from the closing value on Friday of 51%.
WHR Whirlpool Corporation – The home appliances manufacturer has jumped more than 8.5% to stand at $44.28 per share. Earlier in the day shares were up 20% – the biggest intraday climb for WHR in at least 29 years – after the company reported first-quarter earnings that beat analyst expectations. The company has cut costs as well as curtailed a post-retirement benefit plan which added about 84 cents to earnings surprising the street which had anticipated a loss of 18 cents per share for the company. Whirlpool also reported that it expects to earn a profit of between 3 to 4 dollars for 2009. Option traders gobbled up the bearish breakfast and were…
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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.