General Electric Co. (GE) put volume continued to remain high on Monday after trading above the four-week average every day last week, boosted at the start of this week by one trade with a strike price 39 percent below the March 18 close, according to Bloomberg.
A block of 39,526 September $12 puts to sell the world’s largest maker of power-generation equipment traded for 18 cents each at 10:39 a.m. in New York, all at the ask price, according to data compiled by Bloomberg. An investor bought 45,000 of the same puts on March 18. Today’s trade came from the same broker as Friday’s, Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options-market data and analytics, said.
More than 125,000 puts changed hands today, 1.6 times the four-week average and 1.6 times the number of calls to buy. The September $12 puts were the most traded and accounted for 46 percent of all put volume. Fairfield, Connecticut-based GE gained 2.4 percent to $19.72 today and hasn’t fallen below $12 since July 2009.
General Electric closed Monday at $19.72, gaining $0.47, or 2.44 percent.
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Showing posts with label Puts. Show all posts
Showing posts with label Puts. Show all posts
Tuesday, March 22, 2011
Tuesday, March 8, 2011
United States Oil Fund LP (USO) Ratio Put Spread
Shares in the United States Oil Fund (NYSEArca:USO) hit new 52-week high Monday morning, but one huge options player is positioning for the price of the underlying to pull back ahead of April expiration. It appears the trader initiated a sizable ratio put spread to benefit from limited bearish movement in the fund’s shares.
The USO’s shares increased as much as 1.1% at the start of the session to secure an intraday- and two-year high of $42.79. The contrarian player purchased 12,500 puts at the April $41 strike for a premium of $1.71 each, and sold 25,000 puts at the lower April $38 strike at a premium of $0.64 apiece. Net premium paid to establish the spread amounts to $0.43 per contract.
The ratio spread positions the investor to make money should shares in the USO fall 5.2% from today’s high of $42.79 to breach the effective breakeven price of $40.57 ahead of April expiration day. Maximum potential profits of $2.57 per contract are available to the put player if the fund’s shares drop 11.2% to settle at $38.00 at expiration. The ratio of twice as many sold lower-strike puts suggests the investor foresees limited downside movement in USO shares. But, the parameters of the spread expose the trader to losses in the event that the price of the underlying fund declines 17.2% off today’s high to slip beneath the lower breakeven price of $35.43 within the time remaining to April expiration.
Shares in the USO last fell under $35.43 on February 16, 2011. Over 193,000 option contracts have changed hands on the USO as of 11:40am, with investors prefering calls over puts, trading approximately 1.5 call options on the fund for each single put option in play.
USO closed Monday at $42.37, up $0.04, or 0.09 percent.
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The USO’s shares increased as much as 1.1% at the start of the session to secure an intraday- and two-year high of $42.79. The contrarian player purchased 12,500 puts at the April $41 strike for a premium of $1.71 each, and sold 25,000 puts at the lower April $38 strike at a premium of $0.64 apiece. Net premium paid to establish the spread amounts to $0.43 per contract.
The ratio spread positions the investor to make money should shares in the USO fall 5.2% from today’s high of $42.79 to breach the effective breakeven price of $40.57 ahead of April expiration day. Maximum potential profits of $2.57 per contract are available to the put player if the fund’s shares drop 11.2% to settle at $38.00 at expiration. The ratio of twice as many sold lower-strike puts suggests the investor foresees limited downside movement in USO shares. But, the parameters of the spread expose the trader to losses in the event that the price of the underlying fund declines 17.2% off today’s high to slip beneath the lower breakeven price of $35.43 within the time remaining to April expiration.
Shares in the USO last fell under $35.43 on February 16, 2011. Over 193,000 option contracts have changed hands on the USO as of 11:40am, with investors prefering calls over puts, trading approximately 1.5 call options on the fund for each single put option in play.
USO closed Monday at $42.37, up $0.04, or 0.09 percent.
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Monday, March 7, 2011
Health Management Associates (HMA) August Call Options
Shares in Health Management Associates (HMA) are down today, although activity in August contract call options suggests one strategist is positioning for a rally in HMA’s future.
The options player appears to have purchased a debit call spread, buying 1,300 calls at the August $11 strike for a premium of $0.75 each, and selling the same number of calls at the higher August $13 strike at a premium of $0.20 a-pop. The net cost of putting on the spread amounts to $0.55 per contract.
Thus, the bullish trader is poised to profit in the event the health care provider’s shares soar 15.4% over the existing price of $10.08 to surpass the effective breakeven point on the spread at $11.55 by August expiration day. The investor could walk away with maximum potential profits of $1.45 per contract if shares in Health Management Associates jump 29.9% to trade above $13.00 ahead of expiration.
Health Management was trading at $10.08, falling $0.07, or 0.69 percent, as of 2:32PM EST.
The options player appears to have purchased a debit call spread, buying 1,300 calls at the August $11 strike for a premium of $0.75 each, and selling the same number of calls at the higher August $13 strike at a premium of $0.20 a-pop. The net cost of putting on the spread amounts to $0.55 per contract.
Thus, the bullish trader is poised to profit in the event the health care provider’s shares soar 15.4% over the existing price of $10.08 to surpass the effective breakeven point on the spread at $11.55 by August expiration day. The investor could walk away with maximum potential profits of $1.45 per contract if shares in Health Management Associates jump 29.9% to trade above $13.00 ahead of expiration.
Health Management was trading at $10.08, falling $0.07, or 0.69 percent, as of 2:32PM EST.
Lorillard (NYSE:LO) Put Option for April Contract
A three-legged spread involving April contract put options on Lorillard (NYSE:LO) seems to be the play of trader positioning for the price of the underlying stock to drop ahead of expiration.
The stock rallied as much as 5.7% one week ago to trade as high as $81.18 after the FDA said the risk of lung cancer for smokers of menthol cigarettes does not differ significantly from that of non-menthol cigarettes. But, last week’s sharp run up in LO’s shares was fairly short-lived given other portions of the FDA report that were not quite as positive for big tobacco.
One trader expecting Lorillard’s shares to fall in the near-term seems to have established a bearish butterfly spread. The investor picked up 5,000 puts at the April $75 strike for a premium of $4.40 each, sold 10,000 puts at the April $65 strike for a premium of $1.50 apiece, and purchased 5,000 puts at the April $55 strike for a premium of $0.35 a-pop.
Net premium paid to initiate the put ‘fly amounts to $1.75 per contract. The trader profits if LO’s shares decline 6.1% from the current price of $78.00 to breach the effective breakeven point at $73.25 by April expiration. Maximum potential profits of $8.25 per contract pad the investor’s wallet in the event that shares plummet 16.7% to settle at $65.00 at expiration. Options implied volatility on the cigarette-stock is up 3.4% at 54.92% just after 1:00pm in New York.
Lorillard was trading at $77.73, down $0.01, or 0.01 percent, as of 2:29 PM EST.
Source
The stock rallied as much as 5.7% one week ago to trade as high as $81.18 after the FDA said the risk of lung cancer for smokers of menthol cigarettes does not differ significantly from that of non-menthol cigarettes. But, last week’s sharp run up in LO’s shares was fairly short-lived given other portions of the FDA report that were not quite as positive for big tobacco.
One trader expecting Lorillard’s shares to fall in the near-term seems to have established a bearish butterfly spread. The investor picked up 5,000 puts at the April $75 strike for a premium of $4.40 each, sold 10,000 puts at the April $65 strike for a premium of $1.50 apiece, and purchased 5,000 puts at the April $55 strike for a premium of $0.35 a-pop.
Net premium paid to initiate the put ‘fly amounts to $1.75 per contract. The trader profits if LO’s shares decline 6.1% from the current price of $78.00 to breach the effective breakeven point at $73.25 by April expiration. Maximum potential profits of $8.25 per contract pad the investor’s wallet in the event that shares plummet 16.7% to settle at $65.00 at expiration. Options implied volatility on the cigarette-stock is up 3.4% at 54.92% just after 1:00pm in New York.
Lorillard was trading at $77.73, down $0.01, or 0.01 percent, as of 2:29 PM EST.
Source
Friday, March 4, 2011
Acquire J.C. Penney (JCP) Puts Says Morgan Stanley (MS)
Morgan Stanley (NYSE:MS) recommends that traders acquire puts on J.C. Penney (NYSE:JCP), citing higher costs and the inability of the retailer to raise prices.
Christopher Metli and Sivan Mahadevan, strategists at Morgan Stanley, recommend purchasing May $32 puts while selling May $27 puts.
The two said, “The competitive environment will thwart efforts to raise prices. Put spreads give downside exposure to cost inflation and excess inventory pressuring the stock.”
Most of this is predicated on the rising price of cotton, which has risen 13 percent just from February 24 through March 2.
China is behind the rising prices, as demand continues to grow while supply remains constrained.
For J.C. Penney and other relevant retailers, this will make a significant impact on margins and earnings.
J.C. Penney closed Thursday at $33.94, down $0.29, or 0.85 percent.
Christopher Metli and Sivan Mahadevan, strategists at Morgan Stanley, recommend purchasing May $32 puts while selling May $27 puts.
The two said, “The competitive environment will thwart efforts to raise prices. Put spreads give downside exposure to cost inflation and excess inventory pressuring the stock.”
Most of this is predicated on the rising price of cotton, which has risen 13 percent just from February 24 through March 2.
China is behind the rising prices, as demand continues to grow while supply remains constrained.
For J.C. Penney and other relevant retailers, this will make a significant impact on margins and earnings.
J.C. Penney closed Thursday at $33.94, down $0.29, or 0.85 percent.
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