Today’s tickers: QCOM, KBE, XRT, GE, BAC, F, UPS, UAUA & NTRI
QCOM – Qualcomm, Inc. – The manufacturer of digital wireless telecommunications products and services received a vote of confidence by one optimistic options investor who purchased a debit call spread in the July contract today. Qualcomm’s shares rallied 0.55% in late afternoon trading to stand at $42.84 as of 2:45 pm (ET). The trader initiated the call spread by purchasing 4,000 lots at the July $46 strike for a premium of $1.00 each, marked against the sale of 4,000 calls at the higher July $49 strike for $0.37 apiece. Net premium paid for the bullish play amounts to $0.63 per contract, thus positioning the investor to amass maximum potential profits of $2.37 per contract should Qualcomm’s shares rally 14.4% over the current value of the stock to $49.00 by expiration day in July. The parameters of the transaction suggest the responsible party hopes Qualcomm’s share price shifts toward the stock’s current 52-week high of $49.80, attained back on January 8, 2010, in the next several months to expiration.
KBE – SPDR KBW Bank ETF – Shares of the SPDR KBW Bank fund, which replicates the performance of the KBW Bank Index, slipped 0.75% during the course of the trading day to stand at $28.18 with 35 minutes remaining in the session. Earlier today, one investor pocketed a net credit by selling a large chunk of call options spread against the purchase of put contracts. The trader sold 28,260 calls at the May $29 strike for a premium of $0.58 each, and purchased the same number of puts at the lower May $27 strike for $0.40 apiece. A net credit of $0.18 per contract pads the investor’s wallet as long as shares of the underlying fund trade below $29.00 through expiration day in May. Additional profits are available should shares slip beneath $27.00 in the next several weeks. The transaction may be linked to an underlying share position. If this is the case, the put options serve as downside protection should the fund’s share price erode, but the short position in calls could result in the investor having the underlying shares called away from him at expiration should the call contracts land in-the-money at that time.
XRT – SPDR S&P Retail ETF – A massive bearish transaction on the XRT, an exchange-traded fund which seeks to replicate the performance of the S&P Retail Select Industry Index, suggests some investors are bracing for a potential pullback in the price of the underlying stock through September expiration. Shares of the retail fund are trading 0.25% lower on the day at $43.70 as of 12:10 pm (ET). Pessimistic options players purchased 32,500 puts at the September $40 strike for an average premium of $1.39 apiece, and shed the same number of puts at the lower September $34 strike for an average premium of $0.39 each. Net premium paid for the spread amounts to $1.00 per contract. If the large put play is an outright bearish bet, which is not tied to an underlying stock position, traders are prepared to make money beneath the average breakeven price of $39.00 through expiration day. Maximum potential profits in this scenario amount to $5.00 per contract should shares of the ETF plummet 22.2% from the current price to $34.00 ahead of September expiration. The massive size of the transaction indicates the pessimistic play might have been enacted by an investor seeking downside protection on a large underlying stock position. If this is the case, downside protection kicks in should shares of the fund fall 10.75% from the current price to breach the effective breakeven point on the spread at $39.00 in the next several months to expiration.
GE – General Electric Co. – Bullish players flooded the options arena on diverse conglomerate, General Electric Company, today amid a more than 1.5% rally in the price of its shares to a new 52-week high of $19.69. Investors are positioning for continued upward momentum in the price of the underlying stock by coveting call options in the April and May contracts. Bullish traders purchased more than 42,600 calls at the April $20 strike for an average premium of $0.16 per contract. GE’s share price must surpass the average breakeven point on the calls at $20.16 ahead of expiration tomorrow in order for call-buyers to accumulate profits on the call contracts. Buying interest spread to the May $20 strike where more than 12,200 calls were picked up for an average premium of $0.47 a-pop. These optimistic individuals make money as long as General Electric’s shares rally approximately 4% from the new 52-week high of $19.69 to exceed the average breakeven price of $20.47 by May expiration. The overall reading of options implied volatility on GE is up 11.5% to 29.58% as of 12:25 pm (ET).
BAC – Bank of America Corp. – Shares of the second-largest credit-card lender in the United States surged 2.2% during the first half of the trading session to attain a new 52-week high of $19.83 after the firm stated its overdue loans fell in the previous month to the lowest level in more than one year. One big options player was properly positioned to benefit from bullish movement in the price of the underlying stock. The trader banked profits on a previously established long call position today by rolling the large chunk of call contracts up to a higher strike price in the May contract. It looks like the investor originally purchased 25,000 calls at the May $20 strike for an average premium of $0.24 each during Tuesday’s trading session. The rally in BAC-shares over the past couple of days augmented option premium on the May $20 strike calls, the investor sold all 25,000 lots today for $0.72 apiece, thus pocketing net profits of $0.48 per contract. Finally, the trader established a new bullish stance on the stock by purchasing 25,000 calls at the higher May $21 strike for an average premium of $0.37 apiece. The investor makes money on the new position if shares of the underlying stock rally through the breakeven price of $21.37 ahead of May expiration day.
F – Ford Motor Co. – The automaker’s shares are up more than 1.7% to $13.58 today after the firm revealed its European sales surged 16% in March on the success of its subcompact Fiesta model in the U.K., Italy and Spain. Options investors hankering for continued bullish movement in the price of Ford’s shares bought call options throughout the trading session. Traders scooped up more than 22,900 calls at the May $15 strike by paying an average premium of $0.25 per contract. The more than 28,300 calls exchanged at the May $15 strike price thus far today trumps existing open interest at that strike of 20,776 contracts. Investors long the calls stand ready to amass profits to the upside should the auto manufacturer’s shares jump 12.3% over the current value of the stock to exceed the average breakeven price at $15.25 by May expiration day. Options players exchange more than 229,900 contracts on Ford Motor Co. by 12:35 pm (ET).
UPS – United Parcel Service, Inc. – The package and freight delivery services provider received an upgrade to ‘outperform’ from ‘market perform’ at William Blair & Co. this morning after UPS lifted its full-year forecast and posted first-quarter profits that beat analyst expectations. Shares of the underlying stock surged more than 6.4% to secure a new 52-week high of $69.74 following the earnings surprise. UPS revealed earnings expectations in the range of $3.05 to $3.30 for 2010, which is significantly higher than the firm’s previous estimate of $2.70 to $3.05 per share for the full year. Bullish options players celebrated UPS’s good fortune by populating the options field with optimistic trades in morning trading. Investors picked up more than 3,400 calls at the April $70 strike for an average premium of $0.26 each. Call-buyers at this strike make money if UPS’s shares rally above the average breakeven price of $70.26 ahead of expiration tomorrow. Other traders displayed bullish sentiment on the shipping company by shedding approximately 2,000 put options at the May $67.5 strike to take in an average premium of $1.08 per contract. Investors short the puts keep the full premium pocketed on the transaction as long as shares of the underlying stock trade above $67.50 through expiration day in May. Put-sellers are apparently happy to have UPS-shares put to them at an effective price of $66.42 each in the event that the put contracts land in-the-money at expiration.
UAUA – UAL Corp. – One bullish investor populating the options field on the owner and operator of United Airlines this morning pocketed hefty profits by selling deep in-the-money call options. The trader subsequently initiated a fresh bullish stance on the stock to position for continued UAL-share price appreciation through September expiration. UAL Corp.’s shares are up 0.75% to $22.53 as of 11:10 am (ET). It looks like the trader originally purchased 10,250 calls at the now deep-in-the-money June $13 strike for an average premium ranging from $2.45 to $2.95 per contract back on January 11, 2010, when UAL’s shares were trading at $12.94 each. UAUA shares have since exploded 74% higher up to the current price of $22.53. Therefore, the trader was able to sell the calls today for a premium of $9.65 per contract. Net profits, depending on the actual price initially paid to purchase the calls, ranges from a minimum of $6.8675 million to a maximum of $7.38 million. In order to maintain bullish sentiment on UAUA, the investor established a fresh position by purchasing 10,250 calls at the higher September $25 strike for which he paid an average premium of $2.17 per contract. Profits on the new position accumulate if UAL Corp.’s shares jump 20.5% from the current price of $22.53 to exceed the effective breakeven price of $27.17 by expiration day in September.
NTRI – NutriSystems, Inc. – Shares of the provider of a prepared meal program created to assist clients with weight management and nutrition are up 5.3% to $20.45 in early trading. The rally in NutriSystems’ shares whet investors’ appetite for call options on the stock. Bullish options players picked up roughly 4,400 now in-the-money calls at the April $20 strike for an average premium of $0.31 apiece. Call-buyers make money as long as the stock traders above the effective breakeven price of $20.31 through expiration on Friday. Optimism spread to the higher May $21 strike where investors scooped up more than 1,000 calls for an average premium of $0.91 each. NutriSystems’ share price must increase at least an additional 7% from the current value of the stock in order for investors to accrue profits above the effective breakeven point at $21.91 by May expiration.
