Today’s tickers: NEM, EWZ, ZION, JCP, PCX, TSL, NTRI, TIVO, SQNM & KR
NEM – Newmont Mining Corp. – Shares of the gold mining company are up 2.90% to $51.74 this afternoon as gold stocks across the board rallied along with the price of the previous metal. Newmont’s shares recovered significantly since reaching a low point for the year 2010 of $42.87 back on January 29, 2010. The current price per NEM share of $51.74 represents an impressive 20.65% rally over its January low of $42.87. One options trader populating our screens today expects the good times at Newmont Mining to continue through March expiration. The investor purchased a debit call spread by picking up 5,000 calls at the March $55 strike for a premium of $0.52 apiece, marked against the sale of 5,000 calls at the higher March $57.5 strike for $0.17 each. The net cost of the transaction amounts to $0.36 per contract. The trader is prepared to pocket maximum potential profits of $2.14 per contract should Newmont’s shares rally another 11.15% to $57.50 by expiration day. Shares of the underlying stock must increase at least 7% from the current price in order for the call-spreader to breakeven on the trade at $55.36 per share.
EWZ – iShares MSCI Brazil Index ETF – Bearish options positioning on the Brazil exchange-traded fund, which generally reflects the price and yield performance of securities in the Brazilian market as measured by the MSCI Brazil index, indicates one investor is bracing for a pull back in the price of the underlying shares by April expiration. Shares of the underlying fund are trading 1.85% higher to $70.97 with approximately forty-five minutes remaining in the session. The trader sold 10,000 calls at the April $72 strike for a premium of $2.55 apiece in order to partially offset the cost of purchasing 10,000 put options at the lower April $70 strike for $2.73 each. The investor paid a net premium of $0.18 per contract for the bearish risk reversal transaction. The pessimistic play yields profits to the trader if shares of the EWZ trade beneath the breakeven price of $69.82 ahead of expiration in April. We note that shares traded as low as $62.79 on February 8, 2010, and failed to rally above $70.00 until the current session’s breakout.
ZION – Zions Bancorp. – A bullish options player celebrated the 2.80% rally in ZION’s share price to $18.81 today by raking in profits on previously established short put positions. The trader originally sold 10,000 puts at the April $13 strike for a premium of $0.40 apiece on February 4, 2010, when shares of the underlying stock were trading at $17.50. One week later, on February 11, 2010, with shares trading at $18.16, the same individual shed another 12,500 puts at the same strike for a premium of $0.35 each. Today, the trader bought back all 22,500 put options for a premium of $0.15 per contract. Net profits amount to $500,000 because the investor banked net gains of $0.25 per contract on the 10,000-lot position, and pocketed a net $0.20 per contract on the 12,500-lot position.
JCP – J.C. Penney Co., Inc. – A bullish options strategist sold a strangle to finance the purchase of in-the-money call options on department store operator, J.C. Penney Co., today. Shares of the underlying stock are up 2.95% to $28.74 as of midday on the East Coast. Analysts at Citigroup reiterated their ‘buy’ rating on the stock this morning. Fresh bullish positioning dominated options trading in the April contract as one investor utilized both call and put contracts to display optimism on JCP through expiration next month. The trader sold 3,500 puts at the April $26 strike for a premium of $0.47 each in combination with the sale of 3,500 calls at the higher April $30 strike for $0.46 apiece. The so-called short strangle yields a gross premium of $0.93 per contract, and partially finances the investor’s purchase of 3,500 in-the-money calls at the April $28 strike for $1.33 each. The net cost of the bullish combination play amounts to $0.40 per contract. Thus, the trader is positioned to amass maximum potential profits of $1.60 per contract if JCP’s shares rally up to $30.00 by expiration day.
PCX – Patriot Coal Corp. – Shares of the fourth-largest U.S. coal producer are trading 5.25% higher today to stand at $19.03 as of 12:15 pm (ET). The price of the underlying shares rallied as much as 9% over Monday’s closing value of $18.06 to an intraday high of $19.71. Patriot’s shares jumped on takeover rumors the firm could be acquired by Massey Energy Co. Bullish options traders picked up near-term call options on Patriot Coal, perhaps to position for continued upward movement in the price of shares should takeover rumors end up having some semblance of truth to them. Investors purchased 2,500 calls at the March $20 strike for a premium of $0.66 each. Optimists coveted 3,200 calls at the higher March $21 strike for a volume-weighted average premium of $0.38 apiece. Higher-strike call buyers stand ready to accrue profits if Patriot’s shares rally another 8.50% from today’s high of $19.71 to surpass the breakeven point at $21.38 by expiration day. Takeover speculation bumped up the overall reading of options implied volatility on PCX by 13% to a high of 69.24%.
TSL – Trina Solar Limited – A sold strangle established on the China-based manufacturer of integrated solar-power products today suggests one investor expects TSL-shares to remain range-bound through March expiration. Trina’s shares increased 1.75% during the session to $22.94. The strangle seller shed 8,000 put options at the March $20.5 strike for a premium of $0.55 each in combination with the sale of 8,000 calls at the higher March $24.5 strike for $0.35 apiece. The trader pockets a gross premium of $0.90 per contract, which he keeps as long as shares of the underlying stock trade within the $20.50 to $24.50 range through expiration day. The short position acquired in both calls and puts exposes the investor to losses should shares trade above the upper breakeven price of $25.40, or if shares fall below the lower breakeven point at $19.60, ahead of March expiration. The nature of short strangles indicates the trader anticipates decreased volatility in the price of the underlying stock in the next few weeks. Options implied volatility on TSL is currently down 5.40% to 60.35%.
NTRI – NutriSystem, Inc. – Near-term bearish options trading patterns emerged on weight-loss management products firm, NutriSystem, Inc., today as shares plummeted 15.25% to $16.02. NTRI’s share price slim-down follows the company’s disappointing first-quarter profit forecast. NutriSystem expects to earn $0.10 to $0.13 per share in the first quarter due to higher advertising costs and weaker sales. The firm’s forecast is disappointing to analysts expecting earnings of $0.54 a share. Bearish traders sold approximately 1,000 calls at the March $17.5 strike for a premium of $0.33 per contract. Call-sellers keep the full premium received if NTRI’s shares trade below $17.50 through expiration in a couple of weeks. Pessimism spread to the March $16 strike where investors picked up 1,000 puts for an average premium of $0.71 each. Put-buyers are positioned to amass profits should the stock trade under the effective breakeven point at $15.29 ahead of expiration.
TIVO – TiVo, Inc. – The provider of digital video recorders attracted bullish options traders in the first hour of the trading session with shares of the underlying stock up 3% to $10.00. One extremely optimistic individual initiated a plain-vanilla debit call spread in the April contract to position for a significant share price rally by expiration. The investor purchased 4,000 calls at the April $12.5 strike for a premium of $0.80 apiece, and sold the same number of calls at the higher April $15 strike for $0.30 each. The net cost of the spread amounts to $0.50 per contract. TiVo’s share price must surge 30% from the current price in order for the investor to break even on the transaction at $13.00. The TIVO-trader enjoys maximum potential profits of $2.00 per contract if shares jump 50% from $10.00 to $15.00 by expiration day in April.
SQNM – Sequenom, Inc. – The biotechnology firm’s shares are soaring 17.35% higher to $8.12 in morning trading after Cantor Fitzgerald upped its rating on SQNM to ‘buy’ from ‘hold’ and raised its target share price on the stock to $16.00 from $4.00. Bullish options players are initiating optimistic stances on the stock using both call and put contracts. Near-term activity took place at the March $9.0 strike where 5,000 calls were purchased at an average premium of $0.57 apiece. Call-coveting was also observed at the higher June $10 strike where 2,100 contracts were picked up for an average premium of $0.87 each. Finally, investors shed roughly 3,000 puts at the April $8.0 strike to take in an average premium of $1.08 per contract. Put-sellers keep the full premium received if Sequenom’s shares trade above $8.00 through April expiration, but also stand ready to have shares of the underlying stock put to them at an effective price of $6.92 apiece, should the puts land in-the-money at expiration.
KR – The Kroger Co. – Shares of the operator of retail food and drug stores are trading 0.85% higher this morning to $22.60. The rally in the price of the underlying stock allowed one Kroger-bull to take profits on a previously established short put position in the April contract. It looks like the investor originally displayed optimism on the firm by selling 11,600 puts at the April $20 strike for a premium of $0.45 apiece back on February 1, 2010, when Kroger’s shares were trading at approximately $21.50 each. Today the trader bought back the 11,600 short puts at a premium of $0.15 per contract. Thus, the investor walks away from the position with net profits of $0.30 per contract, or total gains of $348,000.
