Today’s tickers: MGM, LVL, XHB, RYL, RIGL & LM
MGM – MGM Mirage – Investors showed their true colors following a 67% decline in profits at Vegas casino and leisure company. The rebound today of more than a quarter of its share price to $13.27 tells us that it was short sellers earlier who tried to take it down. The company was less than optimistic in announcing losses and noted it was shelving expansionary plans until the capital markets were more solid and there were signs of life at the casinos. Calls were in demand in the November contract between strike prices of 12 through 20 while a decent chunk of 10 strike puts was bought for a premium of 1.40 after the shares had recovered. There was also healthy two way activity in the December puts at both 10 and 12.5 strikes. That tells us that the rebound was largely short covering and shares might not yet be out of the mess.
LVS – Las Vegas Sands Corp. – Hand-in-hand with MGM goes Las Vegas Sands, whose shares recovered by a huge 80% to stand at $8.91 today. The move sparked call option buying in the November contract from strikes as low as 5.0 all the way through 17.5. More curiously was activity in the put options where investors chose to go long November 7.5 at a premium of 1.50, while selling short the December 10 strike. Our scanners indicate that some 16% of overall open interest is in play today. Implied volatility subsided from a reading of 293% to 231%.
XHB – SPDRS S&P Homebuilder ETF – Around one quarter of overall option open interest was trading this morning on the homebuilder ETF. This could represent some repositioning across different calendar months. The basket of shares rallied 4.4% to $13.05 while November puts at 18, 19 and 20 saw option volume of 18,000 contracts each. In the January 12 strike some 15,000 contracts were sold for a premium of 2.0 out of total volume of 23,000 in the series. Similar volume was also found at the 15 strike, which traded to mid-market prices.
RYL – Ryland Group Inc. – An investor appears to be rolling out of front month protective puts at the 25 strike and buying January protection across the 12.5, 15 and 20 strike prices. That would appear to indicate that despite an 11% jump in Ryland’s share price to $16.40 this investor remains hesitant on prospects for a meaningful recovery. At 115% implied volatility remains heightened.
RIGL – Rigel Pharmaceuticals Inc. – The day after sour news on its rheumatoid arthritis candidate known as R788, devastated its market cap, shares in Rigel are rebounding today. Activity in its options is curious and the 10,000 lots in play today compares to 30,000 lots open in the stock options series overall. We are unclear as to whether the puts were bought or sold at this stage of the day but the activity at currently unpopulated strike prices indicates that this is a fresh wager by a speculator. The November 5.0 puts traded on volume of 1,000 lots at 50 cents. Shares today are back at $7.98 having printed $5.62 yesterday. At the March 2.5 strike an investor took interest in 7,700 contracts at a 45 cent premium. Is this cheap insurance or is it a bet that the stock won’t be sunk by developments on R788. The company revealed some major differences between trial patients in the U.S. and Mexico. Patients undergoing trial treatment in Mexico were found to develop liver toxicity and high blood pressure. At least one analyst noted that this information was perhaps already known or that there were previous occurrences of differences in the genetic make up. Regardless, the analyst noted that such issues hadn’t prevented ultimate FDA drug approval.
LM – Legg Mason Inc. – Profits beat forecast at money-manager Legg Mason whose shares rose by around one-third to $17.18 after being caught up in the financial market mayhem earlier this week. The company earned 97 cents instead of the forecast of 86 cents, which was impressive despite an 18% slide in revenues. Earlier the company had to draw upon capital of $2.1 billion in order to support its money market funds to insulate clients from losses on mortgage related securities. Put option volume caught our attention after shares had rallied where it appears that investors purchased rights to sell 12 million shares at $12.00 for a 1.05 premium. Meanwhile they sold puts at the December 7.5 strike some 7,500 times at a 70 cent premium. Implied volatility came in by 26% to read 138%.
