Today’s tickers: LCC, XLI, CXO, AMGN, DISH, GNW, DVN, WFR, DISCA & HIG
LCC – US Airways Group, Inc. – Shares of the operator of US Airways are trading higher by 7.50% to $9.29 in late afternoon trading after earlier rallying more than 10.50% to secure a new 52-week high of $9.55. The jump in shares prompted one bullish investor to bank profits on a previously established long call position as well as initiate fresh optimistic stances on the stock. US Airways Group’s shares were helped higher, along with shares of other airline operators, after Continental Airlines Inc. posted better-than-expected monthly unit revenue for May. The LCC-bull appears to have originally purchased approximately 29,000 calls at the June $10 strike for an average premium of $0.23 apiece back on May 26, 2010, when shares of the underlying stock were trading at a volume-weighted average price of $8.33. Today, the trader sold 28,900 calls at the June $10 strike for a premium of $0.45 each to pocket net profits of $0.22 per contract. The same investor then extended optimism on US Airways Group, Inc. by purchasing 25,900 fresh calls at the higher June $11 strike for a premium of $0.24 each. The new June $11 strike call position readies the investor to amass profits should LCC’s shares rally 17.7% over the stock’s new high of $9.55 to surpass the effective breakeven price of $11.24 by expiration. Finally, the trader extended high hopes for a significant rally in US Airways’ shares by picking up another 21,450 calls at the July $12 strike for a premium of $0.32 per contract. The July contract call options yield profits to the bullish player if shares of the airline operator surge 29% to exceed the breakeven price of $12.32 ahead of July expiration.
XLI – Industrial Select Sector SPDR Fund – Put strategists populating the XLI, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the Industrial Select Sector of the S&P 500 Index, initiated bullish and bearish transactions on the fund today. Shares of the ETF are currently trading 2.00% higher on the day at $29.52 as of 3:05 pm (ET). The first of the two large trades observed on the XLI was enacted by an investor selling-to-close a large-volume long put stance in the June contract. It looks like the trader originally purchased 27,000 puts at the June $28 strike for an average premium of $0.85 apiece back on May 21, 2010, when shares of the XLI were trading at a volume-weighted average price of $29.14. Today the investor appears to have sold 26,900 puts at the June $28 strike for a premium of $0.54 each. The sale of the put options indicates, perhaps, that the trader no longer anticipates a pullback in the fund’s share price to below the $28.00-level in the next several weeks to expiration. In isolation, net losses experienced on the closing sale amount to $0.31 per contract. In contrast to the sale of the puts bearish investors are building up debit put spreads in the July contract. It looks like put-spreaders today are adding to spreads purchased during Tuesday’s session. Investors picked up roughly 10,000 in-the-money puts at the July $30 strike for an average premium of $1.82 each, and sold about the same number of puts at the lower July $26 strike for an average premium of $0.50 apiece. Net premium paid to establish the trade amounts to $1.32 per contract. Thus, investors long the spread are prepared to make money if shares of the fund fall 2.85% from the current price to breach the average breakeven point at $28.68. Maximum potential profits of $2.68 per contract are available should the XLI’s shares decline about 12% to breach $26.00 by July expiration day.
CXO – Concho Resources, Inc. – Shares of the independent oil and natural gas company jumped more than 11.4% during the session to touch an intraday high of $57.86, which is just $1.86 less than the stock’s current 52-week high of $59.72 attained back on May 3, 2010. The surge in the price of the underlying stock attracted bullish options investors to the June and July contracts. Near-term optimists hoping to see Concho’s shares surpass the current high for the past year picked up 1,600 calls at the June $60 strike for an average premium of $1.25 each. Call buyers at this strike price make money if CXO’s shares increase another 5.85% to surpass the average breakeven price on the calls at $61.25 by June expiration. Bullish players expecting a less dramatic move in share price bought 1,000 now in-the-money calls at the July $55 strike for an average premium of $3.61 apiece. Traders long the in-the-money contracts stand ready to profit if the oil and gas company’s shares exceed $58.61 through July expiration.
AMGN – Amgen, Inc. – The U.S. Food and Drug Administration’s approval of Amgen’s bone-strengthening drug, Prolia, yesterday fueled the 9% rally in the biotechnology firm’s share price to $55.35 today on optimism the drug may boost the company’s sales and revenue. The FDA’s approval of Prolia follows the May 28 approval by European regulators. Bullish options traders flocked to the June contract to purchase calls at both in- and out-of-the-money strike prices. Approximately 3,400 calls were picked up at the now in-the-money June $55 strike for an average premium of $1.07 apiece. Investors holding these contracts make money if Amgen’s share price exceeds $56.07 by June expiration. Optimism spread to the higher June $57.5 strike where 1,900 calls were purchased at an average premium of $0.365 per contract. Shares of the underlying stock must rally another 4.55% in order for June $57.5 strike call coveters to profit above the average breakeven price of $57.865. Finally, uber-bulls paid just $0.09 per contract to take ownership of 1,200 call options at the higher June $60 strike price. Amgen’s shares would need to jump 8.20% over the current intraday high of $55.35 before traders long the June $60 strike calls start to accrue profits above the average breakeven point to the upside at $60.09. The overall reading of options implied volatility on the world’s largest biotechnology company is down 13.5% to 31.29% following FDA approval.
DISH – DISH Network Corp. – The implementation of a ratio put spread on the provider of direct broadcast satellite subscription television services indicates one pessimistic options player is bracing for potential share price erosion ahead of July expiration. The bearish spread was initiated in the first half of the trading session despite the 2.80% increase in the price of the underlying shares to $21.03. It looks like the investor purchased 2,500 puts at the July $20 strike for an average premium of $1.10 apiece, and sold 5,000 puts at the lower July $18 strike for a premium of $0.45 each. The net cost of the transaction amounts to $0.20 per contract. Thus, the ratio put spreader is prepared to make money should DISH shares decline 5.85% from the current price to breach the effective breakeven point on the spread at $19.80 by expiration. Maximum available profits of $1.80 per contract pad the investor’s wallet if DISH Network’s shares slump 14.40% lower to $18.00 ahead of expiration in July.
GNW – Genworth Financial Corp. – One options investor utilized a total of 60,000 put options on Genworth Financial Corp. in the first half of the trading day perhaps to reduce the cost of locking in the 3.30% rebound in the insurance company’s shares to $15.41. It looks like the put player sold 40,000 puts at the September $10 strike for an average premium of $0.445 apiece in order to purchase 20,000 near-term put options at the June $15 strike for an average premium of $0.77 each. The transaction yields a net credit of $0.12 per contract to the investor, who keeps the full credit received as long as GNW’s share price exceeds $10.00 through September expiration. The short sale of the September $10 strike puts suggests the trader does not expect Genworth’s shares to plummet 35% in the next several months to expiration. However, the long stance in June $15 strike puts indicates perhaps the price of shares of the underlying stock may contract in the near-term, ahead of June expiration. The long put position provides downside protection in case Genworth’s shares slip beneath $15.00 ahead of expiration day.
DVN – Devon Energy Corp. – Shares of the independent oil and gas exploration and production company are up 2.95% to $63.45 as of 12:20 pm (ET) after earlier rallying 3.35% to touch an intraday high of $63.69. The rebound in the price of the underlying shares today perhaps spurred investor demand for near-term call options. Optimistic options traders anticipating continued upward momentum in Devon’s share price picked up 1,000 calls at the June $65 strike for an average premium of $1.01 apiece. Investors long these contracts stand ready to accrue profits if the firm’s shares rally another 4% over the current price of $63.45 to surpass the average breakeven price of $66.01 by June expiration. Buying interest spread to the higher June $67.5 strike where bullish traders purchased approximately 2,300 call options at an average premium of $0.47 each. Higher-strike call buyers make money if Devon Energy Corp.’s shares jump 7.10% to exceed the breakeven point at $67.97 by expiration. Shares of the underlying stock last surpassed $67.97 back on May 13, 2010, when DVN traded at an intraday high of $69.30.
WFR – MEMC Electronic Materials Inc. – Investors piled into near-term in- and out-of-the-money call options on the maker of solar wafers in the first hours of the trading session as shares rallied 4.7% to touch an intraday high of $11.08. Shares tapered off slightly in morning trading to stand 3.5% higher on the day at $10.95 just before 10:45 am (ET). Call coveters picked up 1,200 deep in-the-money contracts at the June $9.0 strike for an average premium of $1.88 each, thus establishing an average breakeven price of $10.88. Buying interest spread to the higher June $11 strike where at least 2,700 calls were purchased at an average premium of $0.58 apiece. Investors long the June $11 strike calls make money as long as WFR’s shares rally another 5.75% over the current price of $10.95 to exceed the average breakeven point to the upside at $11.58 by June expiration day. Finally, bulls bought approximately 3,800 call options at the June $12 strike by shelling out an average premium of $0.27 per contract. MEMC Electronic Materials’ shares must add 12.05% ahead of June expiration in order for higher-strike call purchasers to make money above the average breakeven price of $12.27. The demand for call options on the stock lifted WFR’s overall reading of options implied volatility 6.7% to 68.83% as of 10:50 am (ET).
DISCA – Discovery Communications, Inc. – The global media and entertainment company popped onto our ‘most active by options volume’ market scanner in morning trading after one investor appears to have closed out a substantial long put position in the July contract. Perhaps the 1.80% increase in the price of DISCA’s shares to $37.75 today inspired the trader to close out the large bearish stance. It looks like the investor originally purchased at least 21,000 puts at the July $35 strike for an average premium of $1.25 apiece back on April 23, 2010, when shares of the stock were trading at a volume-weighted average price of $37.01. Today it seems the options player sold 21,000 puts at the July $35 strike for an approximate premium of $1.07 apiece. We do not at this time know whether the original put transaction was tied to stock. But, the closing out of the put position does hint at a bullish change-of-heart for the responsible party. In isolation, the net loss incurred on the sale of the puts roughly amounts to $0.18 per contract.
HIG – Hartford Financial Services Group, Inc. – Bullish options investors picked up out-of-the-money call options on the insurance and financial services firm this morning with shares of the underlying stock trading 1.65% higher to stand at $24.83 as of 10:35 am (ET). It looks like HIG-optimists anticipating continued share price appreciation through expiration this month purchased 1,900 calls at the June $26 strike for an average premium of $0.66 apiece. Investors long the calls make money if HIG’s share price rises 7.4% to surpass the average breakeven price of $26.66 by expiration day. Bulls also populated the higher June $27 strike to purchase 1,400 calls for average premium of $0.39 per contract. Shares of the underlying stock must surge 10.3% over the current share price and exceed the average breakeven point on the calls at $27.39 before higher-strike call buyers start to accrue profits. We note current call open interest levels at both strikes exceed current trading volume. This could mean investors are closing out short call stances rather than establishing fresh bullish positions.
