Today’s tickers: NEM, RIG, CAL & EWZ
NEM – Newmont Mining Corp. – Gold producer, Newmont Mining Corp., enticed bullish options strategists to the arena in the first half of the trading session with shares of the underlying stock rallying nearly 3.00% to a new 52-week high of $61.46 as of 12:15 pm (ET). Investors expecting the price of Newmont’s shares to continue to appreciate ahead of July expiration, and potentially break straight through its all-time high of approximately $62.72 secured back in early 2006, purchased approximately 1,300 call options at the July $65 strike for an average premium of $0.74 apiece. Call buyers at this strike price are poised to profit if shares of the gold company surge 6.95% to surpass the average breakeven price of $65.74 ahead of expiration day next month. Longer-term bullish behavior observed today took place at the sky-high September $75 strike where it looks like 2,000 calls were picked up at an average premium of $0.54 per contract. Investors long the calls make money if the gold producer’s shares jump 22.9% to trade above the average breakeven price of $75.54 by September expiration.
RIG – Transocean Ltd. – Shares of the international provider of offshore drilling services for oil and gas wells are currently up sharply by 7.85% to stand at $53.31 just before 12:30 pm (ET). RIG’s shares have roared back to life recently, rallying 28.55% in the past couple of weeks, from a 2-year low of $41.88 on June 9th, up to an intraday high of $53.84 today. Bullish options players populating the stock today are positioning for RIG’s shares to rebound higher by July expiration. Optimistic investors picked up approximately 1,000 calls at the July $55 strike for an average premium of $2.12 apiece. Traders long the July $55 strike calls profit if RIG’s shares rally another 7.15% from the current price of $53.31 to trade above the average breakeven point to the upside at $57.12 by expiration day next month. Buying behavior spread to the higher July $60 strike where at least 1,200 call options were purchased at an average premium of $0.73 per contract. Investors holding these contracts make money if shares of the underlying stock surge 13.9% to surpass the average breakeven price of $60.73 by July expiration. The overall reading of options implied volatility on Transocean plunged 17.1% to 61.61% by 12:35 pm (ET). The current 61.61% reading of implied volatility on the stock represents a 39.95% decline in volatility on RIG since volatility sky-rocketed up to 102.59% on June 9, 2010, the same day the firm’s shares plunged to a 2-year low of $41.88.
CAL – Continental Airlines, Inc. – A large-volume put spread involving a total of 40,000 July contract put options was likely initiated by an investor bracing for a potential pullback in the price of the underlying in the next several weeks to July expiration. Shares of Continental Airlines are down 1.01% to $24.52 just after 12:45 pm (ET). It looks like the options strategist purchased 20,000 puts at the July $20 strike for an average premium of $0.28 apiece, and sold the same number of puts at the lower July $17 strike for a premium of $0.13 each. The net cost of the debit spread amounts to $0.15 per contract. The spread yields maximum potential profits of $2.85 per contract if CAL’s shares plunge 30.7% from the current price of $24.52 to settle at or below $17.00 by expiration day. Profits start to accumulate if shares of the U.S. carrier fall 19% to trade beneath the average breakeven price of $19.85. We note the July $17 strike puts traded at the asking price of $0.13 per contract, but the July $20 strike puts were marked to the middle of the market at $0.28 each. If the investor is actually initiating a credit spread, rather than a bearish debit spread, he pockets a net credit of $0.15 per contract and keeps the full amount received as long as shares exceed $20.00 through July expiration day. In the credit spread scenario, the investor could lose up to a maximum of $2.85 per contract if CAL’s shares nosedive down to trade below $17.00 by expiration in July.
EWZ – iShares MSCI Brazil Index ETF – Shares of the EWZ, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of publicly traded securities in the aggregate in the Brazilian market as measured by the MSCI Brazil Index, are up 1.05% to $67.52 as of 11:55 am (ET). The fund popped up on our ‘most active by options volume’ market scanner after one options strategist booked profits on a previously established put position. It looks like the investor may have originally purchased 20,000 puts at the June $73 strike for approximately $2.99 per contract on April 9, 2010, when shares of the ETF were trading at a volume-weighted average price of $75.29. Today the trader sold the now deep in-the-money puts for a premium of $5.95 per contract to pocket approximately $2.96 per contract in net profits. The put player, who is probably utilizing the puts to hedge a long position in the underlying shares, next purchased 40,000 put options at the lower July $66 strike for a premium of $2.56 per contract. The new position yields downside protection should shares of the EWZ decline 6% from the current price of $67.52 to breach the effective breakeven point to the downside at $63.44 by July expiration.
