Protective Puts In Play As Eli Lilly Shares Reach Multi-Year High
by Option Review - July 17th, 2012 2:12 pm
Today’s tickers: LLY, NTES & HIG
LLY - Eli Lilly and Co. – Shares in the world’s 10th largest pharmaceutical company touched a fresh three-year high of $44.27 today and remain in positive territory, up 0.35% at $44.00 as of 11:20 a.m. in New York, as major U.S. equity benchmarks rebound off earlier declines amid Fed Chairman Ben Bernanke’s Q&A session with the Senate Banking Committee. Options activity on the drug maker today suggests one or more traders may be locking in Lilly’s share price gains in case the stock falters somewhat during the next couple of months. It looks like a 1,100-lot Sept. $39/$43 put spread was purchased this morning for an average net premium of $1.32 per contract. The debit put spread may represent protective positioning by a trader or traders seeking to hedge long stock in LLY, or an outright bearish bet that the shares may pullback by expiration. Profits – or downside protection – kick in on the spread in the event Lilly’s shares decline 5.3% to breach the average breakeven price of $41.68. Maximum potential profits of $2.68 per contract are available on the position should the drug maker’s shares drop 11.4% to trade at or below $39.00 come September expiration. Meanwhile, trading traffic in Lilly call options indicates some strategists may anticipate fresh multi-year highs for the stock this year. One bullish player appears to have rolled a 500-lot long call position from the July $44 strike out to the Sept. $44 strike to extend optimism on the name. Traders betting on a far larger move to the upside snapped up around 480 calls at the Sept. $50 strike for an average premium of $0.68 apiece. The $50 calls may be profitable at expiration if shares in Eli Lilly and Co. jump 15% over the current price of $44.00 to top $50.68. The company is scheduled to report second-quarter earnings ahead of the open next Wednesday.
Financials continue to rally
by Option Review - May 6th, 2009 5:17 pm
Today’s tickers: CIT, CSCO, AMX, STI, XTO, NTES & MCHP
CIT CIT Group, Inc. – Shares of the North American bank holding company has jumped more than 10% to $3.01 amid the broad gains enjoyed by the financial sector today. CIT appeared on our ‘most active by options volume’ market scanner after one investor initiated a reversal on the stock. The trader sold 21,200 calls at the in-the-money October 2.5 strike price for 1.15 and then purchased 21,200 puts at the same strike price for 40 cents each. Perhaps the investor is looking to bank gains on today’s rally and protect the profits by getting long of puts. The trade resulted in a credit of 75 cents to the individual who is prepared to gain to the downside at any share price below $2.50 by expiration in October.
CSCO Cisco Systems, Inc. – The networking and communications products company is off slightly by about 2% to $19.26. However, we observed bullish option traders looking for a rise in shares by expiration this month. At the May 20 strike price more than 18,900 calls were picked up for an average premium of 40 cents apiece. The breakeven on the trade at $20.40 requires that shares rise by just 6% from the current price in order for call-buyers to begin to profit to the upside by expiration. One month further, the in-the-money June 19 strike price attracted a trader to bank gains by selling 8,200 calls for a premium of 1.24. Perhaps this individual decided to throw in the towel and take in profits today for fear that shares may fall further over the next month and a half and erode the call premium even more.
AMX America Movil SAB de CV ADR – The Mexican local and long-distance telephone services company has experienced a slight 1.5% rally in shares to stand at $36.88 today. We observed option traders loading up on puts in the May, June, and August contracts. The activity drove up the put-to-call ratio to more than 6-to-1 indicating that 6 puts were traded to each call option in action. At the near-term May 34 strike price some 4,500 puts were purchased for an average premium of 28 cents apiece. Further along in the June contract, bearish traders coveted 2,500 puts at the 35 strike for 1.50 each. Finally, the largest purchase was a chunk of 20,000 puts…