Today’s tickers: DRYS, XTO, LGF, MCRI, RVBD, RF, HA, CBS, PCLN
DRYS DryShips, Inc. – The drybulk carrier’s share price rally of more than 25% to $6.94 breathes new life into DryShips’ sails today amid an upgrade to ‘outperform’ from ‘market perform’ by an analyst at Oppenheimer & Co. this morning. The company has also managed to raise $500 million via equity offering that it plans to use to decrease its massive debt. Option investors saluted the bullish news by purchasing calls in the May contract. At the May 7.5 strike price 7,300 calls were picked up for an average premium of 59 cents apiece. Shares need only rise by an additional 7% in order for the May 7.5 strike calls to land in-the-money by expiration next month. More optimistic traders selected the May 9.0 strike and bought 3,000 calls for about 28 cents per contract. Another positive sign for the cargo-carrier was the sale of 1,400 puts at the May 6.0 strike price for 74 cents each as some investors hope that shares remain above the breakeven on the trade at $5.26 by expiration. While much of the activity we observed was bullish in the May contract, we did notice that some downside protection was sought at the May 7.5 strike price as about 2,100 in-the-money puts were picked up at an average premium of 1.55 each.
XTO XTO Energy, Inc. – Shares of the oil and gas exploration company have rallied by more than 3% to $35.20. XTO edged onto our ‘most active by options volume’ market scanner after one investor took profits by closing a short put position. It appears that this individual originally established a short position on March 11, 2009, by selling 19,500 puts at the August 22.5 strike price for a premium of 1.86 apiece. Today, he purchased the lot of 19,500 puts at the same strike for an average price of 75 cents apiece. The difference between the two put premiums yields this investor 1.11 today for closing the position. It looks as though he plans to once again profit from a similar trade as he sold 15,000 puts at the August 26 strike price for an average premium of 1.35 apiece.
LGF Lions Gate Entertainment Corporation – The diversified independent producer and distributor of motion pictures jumped to the top of our ‘hot by options volume’ market scanner after one investor rolled a long call position set to expire today, through to the June contract. Shares have rallied on LGF by about 2% to $5.26 today. This trader sold 25,000 calls at the April 5.0 strike price for a premium of 25 cents apiece and reestablished the in-the-money position at the June 5.0 strike price for 95 cents each. While we are not sure how much this individual originally paid to get long of the April 5.0 strike calls, the net cost he shelled out today to roll the position forward amounts to 70 cents. The true breakeven point on the trade depends on how much this investor originally paid for the April 5.0 calls, however, excluding that unknown variable and using the information we do have, this investor stands to gain unlimited profits to the upside starting at a share price of $5.70.
MCRI Monarch Casino & Resort, Inc. – The casino owner and operator has experienced a share price rise of about 1% to $7.18. One investor appears to have held a long call position in the April contract and has waited until expiration day to roll the position forward as well as increase its size. We believe that he has closed out his April 5.0 strike position by selling 5,000 in-the-money calls for a premium of 2.25 apiece. He then purchased 10,000 calls at the May 7.5 strike price for 1.05 each, hoping that shares will continue to rise. Shares would need to rally by an additional 4% in order for the new chunk of calls to land in-the-money by expiration next month. The trade today involved about 15,000 call options in total, which represents a huge proportion of the current open interest on the stock of 16,400 contracts.
RVBD Riverbed Technology, Inc. – The technology company’s shares have rallied by 2% today to stand at $15.46. The stock has attracted fresh bullish call buying by option traders looking for shares of the company to continue higher. The May 17.5 strike price had more than 5,100 calls picked up for an average premium of 68 cents apiece. More optimistic traders looked to the May 20 strike price and bought more than 1,600 call options for an average price of 23 cents per contract. In order to profit from the nearer to-the-money May 17.5 calls, shares would need to continue to rally by an additional 17% to the breakeven point at $18.18 by expiration. Option implied volatility has surged to the current reading of 82% from the value of 74% recorded at the start of the trading day.
RF Regions Financial Corporation – Shares of the bank have risen again today by about 3.0% to $6.93 after the stock experienced a significant rally of more than 41% (at times) during yesterday’s trading day. The firm reported yesterday that it has slashed its quarterly dividend from a dime to just 1 penny in order to conserve capital. RF added that it would likely report a first-quarter profit rather than the loss of 41 cents per share that many analysts had expected. While option traders bought calls yesterday, today they have concentrated on puts. The May 6.0 strike price had some 3,200 puts purchased at an average price of 85 cents apiece while the in-the-money 7.5 strike price had 3,000 puts bought for a premium of 1.84. Further along, in the August contract, investor selected the 7.5 strike price and picked up more than 1,100 puts for about 2.42 apiece. Volatility on the stock surged to 156% earlier this morning – up from 129% at the end of the day on Thursday – but has since leveled off a bit to the current reading of 145%.
HA Hawaiian Holdings, Inc. – The owner of Hawaiian Airlines, Inc. has experienced a share price decline of about 1.5% to $5.17 amid an upgrade to ‘hold’ from ‘sell’ by TSC Ratings yesterday. HA appeared on our ‘hot by options volume’ market scanner after one investor rolled a bullish position on the stock into the May contract. It appears that this individual has sold about 5,700 calls at the deep in-the-money April 2.5 strike price for a premium of 2.60 each as well as sold 6,000 calls at the April 5.0 strike for 10 cents apiece. The gross premium of 2.70 enjoyed on the dual-sale has been partially utilized to fund the purchase of 11,700 calls for a premium of 1.00 at the in-the-money May 5.0 strike price. The investor retains 1.70 of the premium after establishing a long call position and will continue to amass profits if shares can reverse direction and head skyward. The call purchase is particularly noteworthy as it represents about 35% of the existing open interest on the stock of about 34,000 contracts. Option implied volatility is up slightly on the stock from 142% at the start of the trading day to the current reading at nearly 147%.
CBS CBS Corporation Class B – The mass media company has experienced a significant share price rally of more than 9% to $6.12 today. We observed one investor taking profits by closing out a long position in the June contract and then reestablishing a similar trade in the same month. It looks as though this trader purchased 7,500 calls at the June 5.0 strike price for a premium of 60 cents apiece back on March 18th, 2009. Today he has sold the same number of shares at the same strike price for a premium of 1.40 per contract. Thus, the net profit earned by closing out the position amounts to approximately 80 cents. Furthermore, it appears that he may be utilizing the same strategy again as we observed the purchase of 7,500 calls at the June 7.5 strike price for a premium of 40 cents apiece. Depending on how the share price and option implied volatility on the stock impact call premium over time, this investor could potentially profit once again from the fresh buying activity observed today.
PCLN Priceline.com, Inc. – Shares of the global online travel company have slipped slightly by less than 1% to $89.18. PCLN appeared on our ‘most active by options volume’ market scanner after one investor raked in profits by closing an existing position in the July contract. It appears that this individual had originally sold 12,500 puts at the July 50 strike price for approximately 2.01 apiece between March 18 and March 23, 2009. Today he has closed the short position by buying back the same number of put options at around 55 cents apiece at the same strike price. Given the parameters of the two trades, it seems that he has earned an approximate profit of 1.46 today. Additionally, he may have plans to profit on a similar trade at some point in the future as today he sold 5,000 puts at the July 60 strike for a premium of 1.25 apiece. Depending on how shares and volatility move over time, this investor could again reel in a handsome profit by employing the same strategy.
