Today’s tickers: ISIL, TPG, BUD, YHOO, ESLR, SOL, DE, AMAT, WFMI
ISIL– Options in Intersil, the Nasdaq-listed maker of analog semiconductors for cell phones, handheld devices, and personal computers, traded at nearly 37 times the normal level today, with an unusual preponderance of puts. After trading higher for much of the today, shares reversed late in the session to close out with a 1.2% loss on the day to $27.62. Intersil shares have gained more than 31% in value since establishing a convincing 52-week bottom of $20.81 back on January 17. We would be quick to write off today’s activity as the simple rollover of put positions designed to protect gains in the stock were it not for the fact that implied volatility on all Intersil options spiked 23% to 34.5%, its highest level in nearly a month. Add to this the fact that today’s put buying appears to involve the establishment of new positions, first at the June 30 strike and again at the July 30 strike, where the $2.75 price tag on the position requires another 4% drop from current price levels just to break even.
TPG– Implied volatility and call volume are heating up ahead of after-the-bell earnings from Teekay LNG Partners, the liquefied natural gas transporter for major energy companies. Teekay’s earnings come after several days of relative volume gains and implied volatility movements in VLCC oil transporters. With shares up 5.9% to $29.95, our market scanners picked up a 102% spike in implied volatility to 43.2% – this up against a historic volatility reading of some 21%. With calls out-trading puts by 33 to 1, the consensus in the option market favors upside for Teekay, given the degree of fresh buying in May and June 30 calls. We would note here that the sale of calls at the June 35 strike suggests some call spreads may be going through as option traders count out the possibility of a test of the standing 52-week high of $35.93 over the next month.
BUD– Barely have options in Anheuser-Busch recovered from the hangover of M&A speculation but it looks like there’s a new rumor on tap today. Shares in the maker of Budweiser beer closed 1.2% lower at $51.43, but our option scanners detected a more than 13% intraday rise in implied volatility to read 36% earlier today – this compared to a historic reading of only about 20.6% for the underlying shares. With calls outmoving puts by nearly 5 to 1, we observed two-way traffic in June 55 calls but out-and-out buying at the out-of-the-money $60 strike, where the 55-cent price tag reflects only about a 13% chance of Anheuser-Busch shares breaking to that level ($6 above the standing 52-week high) over the next month.
YHOO– Yahoo! – Shares in the recalcitrant search engine are trading flat-to-higher this morning as the market continues to mull the potential upside following news that corporate “caped crusader” Carl Icahn now owns up to 50 million shares in the company and might launch a proxy contest of his own. Activist shareholder Icahn now owns enough shares in his own right to eighty-six members of the Yahoo board in order to force through more acquisition-minded board members. While some 367,000 options in Yahoo had changed hands by closing bell, many option traders appeared willing to sit on longer-term upside wagers for the company’s share price, with most of the volume going through in the near-expiration front month, with May 30 calls trading to buyers and sellers, and puts at the 25 strike mostly bought. Early in the session we did note some willingness among traders to buy June puts at the 30 strike, paying $3.75 for the right to sell Yahoo shares at that price level next month – implying no quick-fix for Yahoo shares, even as the plot thickens with Icahn now in the mix.
ESLR– Solar energy stocks continue to bust out the big moves for a second consecutive session today. This time around it’s Evergreen making waves with a near-11% gain to $9.36 on back of an analyst upgrade at Jefferies. Just last week, Evergreen shares tanked after Citigroup initiated coverage on the stock with a “sell” recommendation. Today its options traded at 3.4 times the normal level, with 4.5 times as many calls trading as puts. Heavy buying in May and June calls at the $10 strike suggest traders looking to capture fast, relatively short-term moves higher in a stock with the dubious distinction of losing nearly 46% of its value so far this year.
SOL– American depositary receipts of Renesola, the China-based maker of solar wafers for photovoltaic cells, rose 3.3% to $22.39 – a new 52-week high – after raising its guidance for year-end revenues and announcing in a separate statement that it had inked a 6-year deal with Taiwan’s Gintech Energy Corp to supply solar wafers. Option activity rose to 6 times the normal level according to our market scanner, with 4.5 times as many calls trading as puts in a market that seems to favor two-way traffic in front-month calls at strikes 22.50 and 25. Option traders are currently pricing in a slightly better than 1-in-3 chance that Renesola can breach the $25 mark by Friday.
DE– Much of the displaced anxiety that option traders felt in connection with Caterpillar earnings (which ultimately outdid market expectations) found a host in shares of John Deere, the world’s largest maker of tractors and combines. The sting of a Q1 earnings miss was compounded by a dour forecast for construction machinery orders this year – with not even rampant demand for agricultural machinery able to blunt the force of the housing downturn. With shares down 9.9% to $81.25, implied volatility in Deere options came off 21% but at 38% is still elevated above the 35% historic reading. Twice as many calls traded as puts this afternoon, with brisk two-way trading in May 85 calls on volume some 3 times the normal level. This newly out-of-the-money call lost 92% of its value overnight and is trading on a narrow 4-cent bid/ask spread as buyers and sellers swap bets on whether Deere shares can recoup past the $85 level by Friday. Early market action showed traders keen to sell calls at the June 90 strike for $1.25.
AMAT– Shares in Applied Materials rose .20% to $19.90, one day after the world’s largest supplier of so-called nanomanufacturing technology used in the production of semiconductors, reported a 26% drop in Q2 profits due to softer order flow. Yesterday’s profit decline was the fifth consecutive shortfall for Applied Materials. Implied volatility on its options came off nearly 18% this morning. The 49,000 options trading today showed option traders putting nearly twice as many puts in play as calls – closing out positions at the May 20 line, and buying fresh protection at the June 19 put strike for 65 cents per contract.
WFMI– Shares in Whole Foods dropped 12.4% to $29.47, setting a new 52-week low, as the market was caught off guard by the company’s reported 13% drop in Q1 profits. Continued unease over its share price is apparent from the continued elevation in Whole Foods’ implied volatility – at nearly 42%, the option market is pricing in nearly 20% more price risk to Whole Foods shares over the next 30 days than they have shown historically. Option traders may be positioning for this eventually in the form of volatility trades in the May contract at the $30 line – calls at this strike have already traded more than 2,600 times against an open interest of 812 contracts, while the put side shows nearly 5,000 lots trading on a position that has gained 275% in value overnight. Fresh put volume in the June contract was observed as low as the $28 strike.
