Vale put buying nudges share losses

Today’s tickers: RIO, NTAP, MOT, XLF, GE & PFE

RIO – Companhia Vale do Rio Doce ADS – The metals and mining company’s shares are down 6% today to $16.61. RIO appeared on our ‘most active by options volume’ market scanner with notable activity in the March contract as well as put buying in the February contract. One investor purchased 20,500 puts at the March 16 strike price for 1.20 per contract. Thus, this trader is bearish on the stock despite news today that iron ore is experiencing a resurgence of 33% from its 3-year low in October 2008. Shares would need to decline to $14.80 in order for the March 16 puts to yield profits on the down-side for this investor. Other RIO bears snapped up protection by buying puts in February. At the February 16 strike price, 3,600 puts were purchased for 49 cents apiece, while at the February 17 strike, over 2,600 puts were bought for 79 cents per share.

NTAP – Network Appliance, Inc. – As a supplier of enterprise storage and data management software and hardware products and services, NTAP is the number two provider in the industry. Shares are up slightly today by 1% to $16.30. One bullish investor sold 15,200 puts at the February 12.5 strike price for a premium of 10 cents per contract in order to fund call buying at the higher 15 strike. 5,000 calls were purchased for 1.90 per share at the February 15 strike. This trader has effectively reduced the cost of the calls by about 30 cents, yielding a net cost of 1.60. Therefore, this investor’s hoof is pawing at the ground, hoping for a rally in shares to a breakeven of $16.60, an increase of 1.8% by expiration. Delta on the calls currently infers there is a 72% chance that this investor’s calls will land in-the-money and generate profits in the next couple of weeks.