Above Average Volume In Facebook Options As Stock Pushes Higher
by Option Review - September 6th, 2013 3:12 pm
FB – Facebook, Inc. – Shares in Facebook are up 3.9% at $44.32 on Friday afternoon, following a price target increase to $55.00 from $40.00 at SunTrust Robinson Humphrey. SunTrust maintains a ‘Buy’ rating on Facebook.
Options volume on FB is marching higher, topping 475,000 contracts by 1:45 p.m. ET and surpassing the stock’s average daily options volume of approximately 402,000 contracts. Trading in FB calls is outpacing that of puts, driving the call/put ratio to 2.2 as of the time of this writing. Shares in Facebook are up more than 130% since this time last year.
PKG – Packaging Corporation of America – The manufacturer of containerboard and corrugated packing popped up on our ‘hot by options volume’ market scanner on Friday morning due to heavier than usual trading in October expiry calls. Overall options volume in excess of 2,650 contracts as of the time of this writing is more than nine times the stock’s average daily options volume of approximately 290 contracts.
The most actively traded contracts by volume on PKG today are the Oct $57.5 strike calls, with roughly 1,200 lots in play versus open interest of 467 contracts. Most of the volume appears to have been purchased just after 10:00 a.m. ET this morning for an average premium of $0.37 each. Buyers of the $57.5 calls profit at expiration next month in the event that shares in PKG surge 8.0% over the current price of $53.62 to surpass a breakeven point and new 52-week high of $57.87. Packaging Corp is expected to report third-quarter earnings in mid-October.
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Masco Calls Active After Earnings; IWM Attracts Large Put ‘Fly
by Option Review - February 12th, 2013 2:18 pm
Today’s tickers: MAS, IWM & WU
MAS - Masco Corp. – It’s up, up and away for shares in Masco this morning, with the stock up 14.5% on the session at a new four-year high of $20.36, following the maker of home improvement and building products strong fourth-quarter earnings report released after the close on Monday. The stock is up more than 80% since this time last year. Options traders positioning for further upside in the stock during the next few months snapped up some 415 calls at the April $22 strike at a premium of $0.25 per contract. Call buyers profit at April expiration should Masco Corp. shares increase another 9.3% to surpass the effective breakeven price of $22.25. Meanwhile, pre-earnings report bullish bets on MAS have resulted in substantial overnight paper profits for some traders today. It looks like traders purchased around 240 calls at the Feb. $18 strike for an average premium of $0.35 apiece yesterday. These contracts are currently changing hands at $2.60 apiece, a seven-fold increase over the price paid on Monday.
IWM - iShares Russell 2000 Index Fund – Shares in the iShares Russell 2000 Index Fund rallied to a fresh multi-year high again this morning, increasing 0.40% in the early going to touch $91.10. The ETF has rallied more than 8.0% since the end of 2012, but a large options combination play initiated yesterday suggests one strategist is prepared for shares in the fund to pullback during the next six weeks. It looks like the trader purchased a 1-by-2-by-1 put butterfly spread, buying 50,000 puts at the both the Mar. 28 ’13 $82 and $88 strikes and selling 100,000 puts at the central Mar. 28 ’13 $85 strike, for a net premium outlay of $0.29 per contract. The large put ‘fly makes money if shares in the IWM slip 3.7% from Tuesday’s high of $91.10 to breach the breakeven point at $87.71, with maximum potential profits of $2.71 per contract available in the event that shares slide 6.7% to settle at…
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Options Eye Higher Highs For Expedia; Downside Puts In Play On Masco
by Option Review - September 21st, 2012 2:23 pm
Today’s tickers: EXPE, MAS & OVTI
EXPE - Expedia, Inc. – Traders positioning for shares in the online travel site to continue to hit new highs stepped up to purchase bullish call options on Expedia this morning, with shares in the name trading up nearly 6% this morning at a new high of $60.29. Expedia shares are moving higher on Friday after the stock was raised to ‘Buy’ from ‘Hold’ with an increased target price of $68.00 at Deutsche Bank, and was rated new ‘Buy’ with a 12-month target share price of $64.00 at Cantor Fitzgerald. The stock, which has gained nearly 125% since Expedia, Inc. spun off its TripAdvisor unit last year, may have more room to run according to some options players today. Bullish strategists preparing for fresh highs in the near term purchased more than 2,000 calls at the Oct. $60 strike for an average premium of $2.23 apiece. Call buyers profit at expiration next month as long as Expedia’s shares increase another 3% to top the average breakeven price of $62.23.
MAS - Masco Corp.– A large trade in Masco Corp. put options suggests one options player may be securing downside protection on the maker of home improvement and building products, as shares in the high-flying stock tack on another 2.5% today to secure a two-year high of $16.48. The purchase of a block of 40,000 puts at the Jan. 2013 $15 strike this morning for a premium of $1.10 apiece may be the work of an investor hedging a large position in the underlying shares, possibly to lock in gains enjoyed during the stock’s impressive 150% move higher since October 2011. Alternatively, the sizable stake in MAS puts could be an outright bearish bet on the stock, initiated in an attempt to benefit from a pullback in the price of the underlying during the next four months. Profits, or downside protection, kick in if shares in Masco Corp. drop 15.7%…
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Jobs Report Drives Heavy Trading Traffic In Ford, General Motors Options
by Option Review - February 3rd, 2012 1:42 pm
Today’s tickers: F, GM, MAS & GILD
Options commentary to resume on Thursday February 9th.
F - Ford Motor Co. – The better-than-expected jobs number out this morning revved up investor appetite for automobile stocks, driving shares in Ford Motor Co. up 4.0% to $12.75. Call options on the U.S. automaker are flying off the shelves, with nearly 5 calls in play on the stock for each single put option traded. The single-largest transaction in Ford options appears to be a bull call spread that yields maximum possible profits if the price of the underlying rallies nearly 20.0% during the next few months to expiration. It looks like one trader purchased a 30,000-lot April $14/$15 call spread for a net premium of $0.15 per contract. The position may be profitable at expiration if shares in Ford Motor Co. climb 11.0% to surpass the effective breakeven price of $14.15. Maximum potential profits of $0.85 per contract are available on the spread should shares in the auto manufacturer surge 17.6% to exceed $15.00 by expiration. Overall options volume on Ford is up above 175,000 contracts just before 1:00 p.m. ET.
GM - General Motors Co. – GM’s shares are outperforming fellow U.S. automaker, Ford Motor Co., this afternoon, with the stock trading 8.4% higher on the session at $26.35 as of 12:55 p.m. in New York. Optimism spurred by this morning’s stronger-than-expected jobs report was followed by greater-than-usual options action in the name. A debit put spread in the March expiry, which may be an outright bearish bet…
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News Corp. Calls Active As Murdoch & Murdoch Meet With U.K. Lawmakers
by Option Review - July 19th, 2011 4:11 pm
Today’s tickers: NWSA, WFC, TGT & MAS
NWSA - News Corp. – The hours of testimony provided by Rupert and James Murdoch to U.K. lawmakers today had a positive effect on shares in News Corp., which increased 5.8% to $15.84 after the questioning ended. The phone-hacking scandal had pushed shares in the diversified global media company down roughly 18.0% in the past couple of weeks to as low as $14.76 on Monday. The future is bright for shares in News Corp. according to some optimists dabbling in January 2012 contract call options today. Calls on NWSA are far more active than puts, with investors exchanging more than 3.5 calls on the stock for each single put option. Volume is heaviest at the Jan. 2012 $16 strike where upwards of 16,200 call options changed hands against open interest of 3,679 contracts. It looks like the vast majority of these calls were purchased for an average premium of $1.46 a-pop. Call buyers profit if shares in News Corp. rally another 10.2% over today’s high of $15.84 to surpass the average breakeven point at $17.46 by expiration day next year. Trading in the Jan. 2012 $19 strike is congested, as well. Around 10,500 calls have traded at that strike so far today, with some 4,000 contracts purchased for an average premium of $0.48 apiece, and another 5,500 trading to the middle of the market. Open interest in the Jan. 2012 $19 strike call is sufficient to cover volume generated at that strike today, which may mean buyers are closing rather than opening positions. Nearly 40,000 option contracts have changed hands on the media company as of 1:15 pm in New York.
WFC - Wells Fargo & Co. – Record profits reported by San Francisco, CA-based Wells Fargo this morning pushed shares in the financial…
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Goldman-Bulls Foresee Greener Pastures by July
by Option Review - January 26th, 2010 5:59 pm
Today’s tickers: GS, AMLN, LYV, KFT, PM, IYR, MAS, VMW, BKS & CAL
GS – Goldman Sachs Group, Inc. – Option traders assumed medium- and long-term bullish stances on the global investment banking and management firm today to position for a rebound in shares in the next six to twelve months. Shares edged 1.65% lower during the session to stand at $152.43 as of 2:45 pm (EDT). One optimistic individual sold 2,500 put options for a premium of $8.90 apiece at the July $140 strike in order to finance the purchase of 2,500 calls at the higher July $175 strike for about $6.10 each. The trader receives a net credit of $2.80 per contract on the risk reversal play, and keeps the full amount as long as Goldman’s shares trade above $140.00 through expiration in July. Additional profits amass if the stock price jumps 15% over the current price to surpass the $175.00-level by expiration. Longer-term optimism appeared in the January 2011 contract where another Goldman-bull purchased a call spread. The investor bought approximately 2,300 call options at the January 2011 $160 strike for an average premium of $17.38 apiece, and sold the same number of calls at the higher January 2011 $195 strike for about $6.50 each. The net cost of the spread amounts to $10.88 per contract. Maximum potential profits of $24.12 per contract accumulate if Goldman’s shares surge 28% from the current price to $195.00 by expiration next January.
AMLN – Amylin Pharmaceuticals, Inc. – Shares of biopharmaceutical company, Amylin Pharmaceuticals, are up more than 11% to a new 52-week high of $19.39 in afternoon trading. The stock opened the session even higher at $19.97 on “optimism that the company’s new version of diabetes treatment Byetta will be approved following U.S. regulators’ clearance of a similar drug”, according to an earlier report by Elizabth Lopatto at Bloomberg. Option traders initiated bullish plays on the stock to position for upward movement in AMLN shares, which is likely to occur if the Food & Drug Administration approves the once-weekly version of Byetta, known as Byetta LAR. One investor established a bullish risk reversal by selling 10,000 puts at the February $17.5 strike for a premium of $0.50 each, spread against the purchase of 10,000 calls at the higher February $20 strike for $0.80 apiece. The net cost of the reversal amounts to $0.30 per contract and positions the trader…
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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.