Contrarian Plays Payoff As 3D Systems Shares Stage Intraday Rebound
by Option Review - February 25th, 2013 3:43 pm
Today’s tickers: DDD, KMB & CMP
DDD - 3D Systems Corp. – Shares in the provider of 3D content-to-print solutions were hit hard on Monday after the company reported fourth-quarter revenue below analyst expectations. The stock fell as much as 20% to $30.28 in the first 30 minutes of the trading session, but has since rebounded somewhat to trade 7.8% lower on the day at $35.00 as of 12:05 p.m. ET. Options traders anticipating a rebound in DDD shares in the near term snapped up weekly calls on the stock this morning. It looks like traders picked up around 450 contracts at both the Mar. 01 ’13 $31.67 and $33.33 striking prices at average premiums of $1.41 and $0.69 each, respectively. The strong intraday recovery in shares of 3D Systems now finds these upside call options changing hands at $4.20 and $2.70 apiece as of 12:15 p.m. in New York to the benefit of early-bird buyers of those contracts. Meanwhile, options players bracing for further declines have seen the value of bearish positions decline with the rebound in DDD shares. Upwards of 800 puts traded at the Mar. 01 ’13 $30 strike during the first half of the session, with much of the volume purchased for an average premium of $0.55 apiece in the early going. Premium required to purchase the $30 strike weekly puts has halved intraday to $0.25 per contract as of 12:20 p.m. ET.
KMB - Kimberly-Clark Corp. – Bullish options are changing hands on the operator of well-known consumer hygiene brands, including Kleenex and Scott, with shares in Kimberly-Clark rising 1.5% to a record high of $95.90. The company last week raised its quarterly dividend by 9.5% to $0.81 a share. Options traders looking for shares in the name to add to the more than 13% rally since the end of 2012 picked up March expiry calls on the stock this morning. Traders stepped in the purchase around 500 of the Mar. $97.5 strike calls on KMB this morning for an average premium of…
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Time Warner Bull Channels Stock and Option Combo Play
by Option Review - January 6th, 2011 4:11 pm
Today’s tickers: TWX, KBE, KMB & AET
TWX - Time Warner, Inc. – A massive transaction combining Time Warner stock and options suggests one strategist expects bullish movement in shares of the media and entertainment company ahead of February expiration. Time Warner’s shares are currently trading 0.40% higher on the session at $33.30 as of 1:25pm. The combo-player initiated a delta neutral trade, selling 1,400,000 shares of the underlying at $33.00 each, and buying 40,000 calls at the February $34 strike for a premium of $0.56 apiece, on a 0.35 delta. This is another one of those stock and option combinations in which the investor wants to have his cake and eat it too. The short stock leg of the trade works in the event Time Warner loses value, but should the shares jump, the value of the calls is intended to swell and outpace losses on the now losing stock price. As the share price increases the delta on the calls moves higher meaning that the value of the calls appreciate at a faster rate leaving the investor better placed as a bull. In other words, gains from the rising value of the call options, given share price appreciation, will eclipse losses that accumulate from the short stance in TWX shares. Time Warner’s shares last traded above $34.00 back on May 30, 2010.
KBE - SPDR KBW Bank ETF – Large prints in March contract call options on the SPDR KBW Bank ETF this morning appear to be the work of one strategist taking profits off the table and extending bullish sentiment on the fund through expiration in a few months time. Shares of the KBE, an exchange-traded fund that replicates the performance of the KBW Bank Index and invests in regional banks and other diversified financial services industries, are currently down 0.50% to stand at $26.68 as of 12:30pm in New York. It looks like the investor originally purchased a total of 27,100 calls at the March $26 strike, picking 20,000 lots for an…
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Brocade Options Hyperactive
by Option Review - October 8th, 2009 4:34 pm
Today’s tickers: BRCD, WYN, CAR, TGT, CBST & KMB
BRCD - Shares of the telecommunications equipment provider continue to rally today. The stock gained more than 6.5% during the session and reached a new 52-week high of $9.65. The BRCD ticker symbol catapulted to the top of our ‘most active by options volume’ market scanner as investors exchanged more than 235,000 option contracts on the stock by lunchtime. It appears one investor executed a massive bull call spread in the November contract. The transaction involved the purchased of about 65,000 calls at the November 12 strike for an average premium of 37 cents each, spread against the sale of approximately 65,000 calls at the higher November 13 strike for 20 pennies apiece. The net cost of the trade amounts to 17 cents per contract for an approximate total price tag of $1,105,000. The investor stands to make 83 cents per contract for maximum potential profits of $5,395,000 if shares of BRCD rise 35% to $13.00 by expiration in November. – Brocade Communications Systems, Inc. –
WYN - Shares at the hotelier broke nicely to the upside earlier in the week and stand 3% ahead of a congestion zone at $18.00. Yesterday Goldman Sachs raised the stakes with an upgrade and a 12-month price forecast of $26 per share. With earnings scheduled for October 28, it appears that one investor has used a call option combination to target a move higher in WYN today. Option implied volatility remains high at 67% but is not rising as the shares surge. There was an outright buyer of 15,000 November 22.50 strike calls purchased for 45 cents, while the 20/25 call spread traded about 9,000 times at a net of 75 cents. To break even the share price needs to accelerate by a further 15% to $20.75 ahead of expiration. – Wyndham Worldwide –
CAR - The global car rental company’s share price contracted 4.5% this morning to $11.93 after firm announced the pricing of its offering of $300 million of 3.50% convertible senior notes due 2014. Despite the decline in shares, one investor utilized options in the January 2010 contract to take a bullish stance on the stock. It appears the trader financed the purchase of a call spread by selling out-of-the-money put options. The three-legged transaction involved the sale of 2,200 puts at the January 10 strike for 1.15 apiece, spread against the purchase…
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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.
