Today’s tickers: AAPL, APC, GE, CCL, EMC, RAH, EEM, WAG, FTR, OMX & JPM
AAPL – Apple, Inc. – Bulls sank their teeth into Apple call options today in order to position for continued appreciation in the price of the underlying through August expiration. The iPhone maker’s shares increased as much as 2.10% during the trading session to secure an intraday high of $275.97 perhaps on news the firm sold 3 million iPads in the first 80 days since the product was introduced to the U.S. marketplace. Apple optimists expecting shares to surpass yesterday’s new 52-week high of $279.01 purchased 1,100 calls at the August $280 strike for a hefty premium of $14.64 apiece. Investors long the calls are positioned to profit if Apple’s shares rally 6.75% over today’s intraday high of $275.97 to trade above the average breakeven point at $294.64 by August expiration. Bulls anticipating more significant share price gains by August expiration purchased approximately 2,500 calls at the higher August $290 strike for an average premium of $9.70 each. Investors long the August $290 strike contracts make money if the iPod maker’s shares surge 8.6% to exceed the average breakeven price of $299.70 by expiration day. Finally, uber-bulls bought 2,000 calls at the higher August $300 strike for an average premium of $7.38 a-pop. Traders holding the August $300 strike calls stand ready to accumulate profits as long as Apple’s shares jump 11.4% to trade above the average breakeven point on the calls at $307.38 by expiration day in August. Nearly 200,000 option contracts changed hands on Apple, Inc. by 3:00 pm (ET), with call options trading 1.35 times to each single put option in play.
APC – Anadarko Petroleum Corp. – Shares of the independent oil and gas exploration and production company which holds a 25% stake in BP’s leaking well in the Gulf of Mexico dropped 4.35% late in the session to stand at $41.56 as of 3:15 pm (ET). Despite the decline in the price of the underlying today one optimistic option strategist positioned himself to one day bask in the light at the end of the tunnel by enacting a bullish debit call spread in the November contract. APC’s shares plunged 53.4% from a high of $74.14 on April 20 – the day the leak was triggered – down to a 52-week low of $34.54 on June 9, 2010. Since bottoming out on June 9, Anadarko’s shares recovered about 20% of total losses incurred since the leak began. The call-spreader observed on APC today is positioning for a more significant resurgence in the value of the firm’s shares by November expiration. The investor purchased 12,000 calls at the November $47.5 strike at a premium of $5.00 each, and sold 12,000 calls at the higher November $57.5 strike for $1.95 in premium apiece. The net cost of the bullish play amounts to $3.05 per contract. The trader starts to make money if Anadarko’s shares rally another 21.6% over the current price of $41.56 to surpass the effective breakeven point to the upside at $50.55 by November expiration. APC’s shares must surge 38.35% over the current price to trade at or above $57.50 in order for the investor to garner maximum available profits of $6.95 per contract.
GE – General Electric Co. – Options investors populating the August contract on General Electric this afternoon appear to be bracing for a gloomy couple of months ahead. GE’s shares slipped 1.25% lower in late afternoon trading to arrive at $15.90 by 3:10 pm (ET). Pessimistic players expecting shares to continue to decline ahead of August expiration purchased approximately 2,900 puts at the August $15 strike for an average premium of $0.43 apiece. Put buyers at this strike are poised to profit should shares of the underlying stock fall another 8.4% to breach the average breakeven point to the downside at $14.57 by expiration day. Investors confident shares are not likely to rebound sold 5,400 calls at the August $17 strike to take in an average premium of $0.335 per contract. Call sellers keep the full premium pocketed on the transaction as long as General Electric’s shares trade below $17.00 through expiration in August.
CCL – Carnival Corp. – Pessimistic options investors shed call options on cruise operator, Carnival Corp., in the first half of the trading session with shares of the underlying stock down 2.50% to stand at $33.87 as of 1:05 pm (ET). Earlier in the trading day shares of the world’s largest cruise operator fell 4% to touch down at an intraday low of $33.34. Carnival’s shares sank after the firm’s third-quarter earnings forecast of $1.43 to $1.47 a share came in below Wall Street estimates of $1.52 a share. Bearish options strategists responded to the dip in shares today by shedding call options in the July contract. Investors sold approximately 2,400 calls at the July $36 strike for an average premium of $0.44 per contract. Call sellers at this strike price keep the full premium received on the transaction as long as Carnival’s shares trade below $36.00 through July expiration. Bears with a bigger appetite for risk shed roughly 1,900 calls at the lower July $35 strike to pocket an average premium of $0.76 apiece. Investors short the July $35 strike calls walk away with the full premium received as long as the calls fail to land in-the-money by expiration day next month. CCL’s overall reading of options implied volatility is down 14.5% to 35.74% in afternoon trading following the firm’s second-quarter earnings report released this morning.
EMC – EMC Corp. – One bullish options investor expecting EMC Corp.’s shares to attain a new 52-week high by August expiration initiated a buy-write strategy on the stock in the first half of the trading session. EMC’s shares are currently trading 0.05% higher on the day at $19.25 just before 12:30 pm (ET). The covered-call player appears to have sold 1,500 calls at the August $21 strike for a premium of $0.31 apiece in conjunction with the purchase of shares of the underlying stock, which were trading at an average price of $19.21 at the time of the transaction. The sale of the call options effectively reduces the cost of buying EMC Corp. shares to an average price of $18.90 each. The buy-write strategist is therefore positioned to enjoy maximum gains of 11.1% if EMC’s shares rally above $21.00 by August expiration. In contrast to the bullish activity in the August contract, another options player threw in the towel on EMC Corp. by selling 3,500 calls at the July $21 strike for an average premium of $0.08 each. The call seller apparently does not believe the firm’s shares are set to rally 9% to surpass to $21.00 ahead of July expiration.
RAH – Ralcorp Holdings Inc. – Shares of the manufacturer of a variety of private label food products edged more than 2.6% lower today to trade at $55.78 by 12:40 pm (ET). Yesterday the St. Louis, MO-based company agreed to purchase American Italian Pasta Co. for approximately $1.2 billion in cash in order to expand its product portfolio. The decline in the price of Ralcorp Holdings’ shares today did not deter some options investors from initiating a near-term bullish stance on the stock. It looks like optimistic traders sold 1,500 puts at the July $55 strike to pocket an average premium of $0.91 per contract. Put sellers keep the full premium received on the transaction as long as RAH’s shares exceed $55.00 through July expiration. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $54.09 each in the event that the put contracts land in-the-money at expiration. The overall reading of options implied volatility on Ralcorp Holdings Inc. is soaring 32.1% higher this afternoon to 24.98% as of 12:45 pm (ET).
EEM – iShares MSCI Emerging Markets Index ETF – Shares of the EEM, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the MSCI Emerging Markets Index – an index designed to measure equity market performance in the global emerging markets, are currently up 0.10% to $40.65 as of 12:20 pm (ET). One options strategist populating the September contract on the ETF initiated a ratio call spread to position for continued appreciation in the price off the underlying fund by expiration. The investor purchased 10,000 in-the-money calls at the September $40 strike for a premium of $2.54 apiece, and sold 20,000 calls at the higher September $43 strike for a premium of $1.12 each. The net cost of the bullish transaction amounts to just $0.30 per contract. Thus, the investor responsible for the spread is prepared to make money above the effective breakeven price of $40.30. Maximum available profits of $2.70 per contract pad the trader’s wallet if shares of the EEM rally 5.8% to settle at $43.00 at expiration.
WAG – Walgreen Co. – Disappointing third-quarter earnings from the largest U.S. drugstore chain sent shares of the underlying stock down as much as 6.70% to an intraday low of $28.12. Walgreen Co. posted an 11% decline in third-quarter net income to $0.47 a share from $0.53 a share in the same period last year. WAG was cut to ‘hold’ from ‘buy’ at Lazard Capital this morning. The sharp decline in shares of the drugstore chain spurred some options traders to throw in the towel. Bears expecting WAG’s shares to trade below $30.00 through July expiration shed 1,900 calls at the July $30 strike for a premium of $0.30 apiece. Investors selling the calls may be ditching previously established bull call positions to garner dwindling premium, or may be initiating fresh short call positions because they expect to walk away with the $0.30 premium per contract received on the sale. WAG’s reading of options implied volatility is down 7.3% to 29.99% following earnings.
FTR – Frontier Communications Corp. – Two large-volume bearish debit put spreads were purchased on Stamford, CT-based Frontier Communications Corp., a firm that provides internet, television and other services to rural areas and small to medium-sized towns and cities, in the first 15 minutes of the trading session. Shares of the communications company are currently lower on the day by 1.40% to stand at $7.75 as of 10:45 am (ET). According to a Bloomberg article this morning, FTR sued Google Inc. for infringement of a new patent for enhanced telephone services. Perhaps the bearish activity observed on Frontier this morning is the work of investors fearing FTR’s shares may continue lower in the next couple of months. The puts spreads are identical in size and utilize the same strike prices in the July and August contracts. The nearer-term spread involved the purchase of 20,000 puts at the July $7.5 strike for a premium of $0.22 each, marked against the sale of the same number of puts at the lower July $5.0 strike for $0.02 apiece. The net cost of the transaction amounts to $0.20 per contract. Thus, the spread positions the trader to accumulate maximum potential profits of $2.30 per contract if Frontier Communications’ shares plunge 35.5% to trade at or below $5.00 by July expiration day. The investor starts to make money if shares slip beneath the effective breakeven price of $7.30 ahead of expiration. The 20,000-lot August $5.0/$7.5 debit put spread cost a net $0.40 per contract and yields maximum potential profits of $2.10 per contract if FTR’s shares fall to $5.00 by expiration day in August. The two spreads utilized a total of 80,000 put options, which is 2.4 times greater than the number of contracts of total existing open interest on Frontier of 33,223 contracts. The jump in demand for options on Frontier Communications Corp. bumped up the stock’s overall reading of options implied volatility 25.7% to 37.01% as of 11:00 am (ET).
OMX – OfficeMax, Inc. – Shares of the office supplies retailer rallied nearly 6.7% to briefly touch an intraday high of $16.76 this morning. However, OMX was unable to hold onto earlier gains, and shares are currently up just 0.25% to stand at $15.75 as of 11:07 am (ET). The initial surge in the price of the underlying stock inspired bullish options strategists to take action. Investors anticipating continued appreciation in the retailer’s shares purchased approximately 1,400 in-the-money calls at the July $15 strike for an average premium of $1.65 apiece. Call buyers at this strike price are prepared to profit should shares trade above the average breakeven price of $16.65 ahead of July expiration. Optimism spread to the higher July $17.5 strike where 1,500 call options were purchased at an average premium of $0.61 each. Investors long these contracts make money if OfficeMax’s shares jump 15% from the current price of $15.75 to surpass the effective breakeven price of $18.11 by expiration day next month.
JPM – JPMorgan Chase & Co. – Near-term bullish activity on JPMorgan this morning suggests some options investors are positioning for a rally in the price of the underlying shares by July expiration. JPM’s shares are up 0.45% at $39.05 as of 11:15 am (ET). Optimistic traders picked up at least 6,350 now in-the-money calls at the July $39 strike for an average premium of $1.31 apiece. Investors holding the calls are prepared to accumulate profits if JPM’s shares rally another 3.2% to trade above the average breakeven point to the upside at $40.31 by expiration day in July.
