Today’s tickers: YHOO, HPQ, QCOM, F & HTX
YHOO – Yahoo Inc! – Perhaps now that Jerry Yang has stepped aside as CEO of ailing Yahoo! we’re seeing the ‘yeehaw!’ effect in play. Investors bought shares in the second largest Internet search engine in hopes that the shift of management might spur fresh talks with Microsoft. Since Yahoo! under Yang has shed some $20 billion in market cap since those talks failed, investors are now prepared to bet that a new leader will present a more affable proposition to Microsoft. With shares 13.6% higher at $12.08 there is no shortage of optimists who believe that a partial MSFT bid might achieve a bid as high as $18.00 per share. Judging by the option strategy employed by one investor in the deferred April 2009 contract, a floor is in place for Yahoo!’s shares now that Yang is gone. An investor sold 5,500 put options at the 10.0 strike for a 2.09 premium while purchasing upside risk at the 13.0 strike for 2.75. The upside potential is unlimited and effectively costs the investor just 66 cents per contract.
HPQ – Hewlett-Packard Corp. – The company managed to deliver earnings growth in a poor environment, which makes an 11.6% share price gain to $32.67 quite understandable. Sales grew 19% on the quarter and the company beat expected earnings by 3% proving just how competent it is in dealing with a tougher economic environment. Options traders focused on both the December and January contracts. The 1.70 premium at the December strike shows investors believe that HPQ could trade as high as $36.70 before the options expire in a month. They added 16,000 calls to established positions amounting to 8,352 lots. At the same strike in January a further 16,600 calls changed hands at a higher premium of 2.50 while investors also targeted 37.5 and 40 strike calls this morning.
QCOM – Qualcomm Inc. – For a company whose shares bucked the market rally today falling by 1.8% to $31.09, option volume was on the heavy side at 31,000 contracts. Curiously activity was on the bullish call side where investors traded the January 25 and 32.5 strikes. The lower strike here is deep-in-the-money and the premium rich at 7.50. The 32.5 calls traded 7,118 times at around 2.75 while existing open interest stands at just 6,720 lots. Option implied volatility today is barely changed at around 71%.
F – Ford Motor Co. – As heads of the not-so-big-three-anymore automakers head to Congress to ask for a rather large loan worth several times their joint market capitalization, a hefty chunk of puts traded in Ford’s 7.50 series at the January contract. Some 62,500 puts traded at a 6.0 premium to the middle of the market. Because Ford’s stock, amongst others, has become hard to borrow, investors tend to use puts to place bearish bets. Compared to existing open interest of 231,777 contracts, today’s trade is a drop in the ocean. By noon shares had stopped rising and stood unchanged at $1.72.
HTX – Hutchison Telecommunications ADR – The mobile and fixed-line telecommunications company recently rebounded from a 52-week low at $12.52 and last week investors were treated to a special and rather large special dividend. The company said it had failed to find a suitable Asian acquisition and so was distributing cash to shareholders on record. The stock flew north, but has subsequently come back to earth. Today, with its shares marginally lower at $18.94 our market scanners have picked up unusual activity involving bearish activity. Investors have only a total of 3,764 positions outstanding on the company before today. In the June contract investors bought 6,500 put options for just 10 cents each, granting them selling rights at a fixed $12.50 share price. The logic here is that an investor believes the share price won’t maintain its healthy status, partially inspired by the special dividend and might just retreat towards the recent low.
