Bullish strategist positions for rebound in Plains Exploration & Production Co. shares
Today’s tickers: PXP, MRVL, SRE, RIMM, MU, AFL, BMY & DELL
PXP – Plains Exploration & Production Co. – The implementation of a three-legged bullish options combination play on Plains Exploration & Production Co. drew our attention to the November contract where one investor utilized call and put options to position for a rebound in the price of the underlying stock. Shares of the independent oil and gas company soured in late afternoon trading, slipping 3.2% lower to stand at $20.98 by 3:35 pm (ET). PXP’s current price of $20.98 represents a 40.4% decline in value since April 15, 2010, when the stock touched an intraday high of $35.41. But, the options activity observed in the November contract today indicates one trader is expecting the stock to rebound sharply ahead of expiration in five months time. The investor essentially sold short put options in order to partially finance the purchase of a debit call spread. The trader purchased 10,000 calls at the November $22.5 strike for a premium of $2.45 each, sold 10,000 calls at the higher November $28 strike for a premium of $0.70 each, and finally sold 10,000 puts at the November $17.5 strike for a premium of $1.30 a-pop. The net cost of the transaction amounts to $0.45 per contract. Thus, the investor responsible for the three-legged play is positioned to make money as long as PXP’s shares rally 9.4% to surpass the effective breakeven price of $22.95 by expiration day in November. Maximum potential profits of $5.05 per contract are available to the trader if Plains’ shares surge 33.5% to surpass $28.00 by November expiration.
MRVL – Marvell Technology Group Ltd. – Global semiconductor maker, Marvell Technology Group Ltd., popped up on our ‘most active by options volume’ market scanner in the second half of the trading session due to rampant bearish options activity in the July and August contracts. Marvell’s shares edged 1.50% lower this afternoon to stand at $17.11 just ahead of the closing bell. Pessimistic traders expecting shares to continue lower ahead of July expiration sold 3,100 calls at the July $17 strike for an average premium of $0.74 each. Call selling spread to the August $15 strike where 2,300 in-the-money calls were sold at an average premium of $2.52 per contract. Perhaps in-the-money call sellers are hoping to keep the full premium received on the sale, which is possible only if Marvell’s shares decline another 12.33% to slip beneath $15.00 ahead of August expiration. Investors sold another 3,800 in-the-money calls at the August $16 strike for an average premium of $1.82 each. Finally, 3,000 in-the-money calls were shed at the higher August $17 strike for an average premium of $1.22 apiece, and some 3,200 calls were sold at the August $18 strike for an average premium of $0.77 a-pop. Bearish traders selling call options on the semiconductor maker benefit if Marvell’s shares continue to decline through July and August expiration.
SRE – Sempra Energy – Near-term bearish options investors honed in on July contract put options on Sempra Energy despite the 1.00% rally in shares of the energy services holding company to $48.72 this afternoon. Pessimistic players wary Sempra’s shares could reverse course ahead of July expiration purchased approximately 4,000 puts at the July $45 strike for an average premium of $0.31 apiece. Put buyers at this strike price profit if shares of the underlying stock fall 8.3% to breach the average breakeven price of $44.69 by expiration day next month.
RIMM – Research in Motion, Ltd. – One options trader purchased a debit put spread in the August contract today perhaps because he is not convinced the Blackberry maker’s shares have yet reached a bottom. RIMM’s shares are currently up 0.40% to $52.44, recovering slightly after last week’s horrendous performance, and bouncing up off an intraday- and new 52-week low of $51.96 this morning. The RIMM-bear is preparing for shares of the underlying stock to suffer further declines ahead of August expiration by purchasing roughly 6,000 in-the-money puts at the August $52.5 strike for an average premium of $3.49 each, and by selling about the same number of puts at the lower August $42.5 strike for an average premium of $0.63 apiece. Net premium paid to establish the pessimistic play amounts to $2.86 per contract. The put spreader makes money if, by expiration, RIMM’s shares fall another 5.33% to reach new lows and breach the average breakeven point to the downside at $49.64. Maximum available profits of $7.14 per contract pad the investor’s wallet if Research in Motion’s shares plunge 18.95% from the current price of $52.44 to trade at or below $42.50 by August expiration.
MU – Micron Technology, Inc. – Bullish options strategists dominated activity on the manufacturer of semiconductor devices today ahead of the firm’s third-quarter earnings report slated for release after the closing bell this evening. Micron’s shares rallied as much as 6.2% to touch an intraday high of $10.05, and are currently up 5.50% at $9.98 as of 1:00 pm (ET). Investors looking for solid third-quarter earnings to fuel a rally in the price of Micron’s shares sold puts and purchased calls on the stock today. Meanwhile, near-term action centered at the July $10 strike where traders initiated long positions in both call and put options. Put buyers picked up at least 3,200 lots at the July $10 strike for an average premium of $0.56 each. Investors long the puts are prepared to profit should Micron’s earnings disappoint, and shares of the underlying stock slip beneath the average breakeven price of $9.44 by July expiration day. Bullish individuals scooped up about 3,300 calls at the same July $10 strike for a premium of $0.47 apiece. Another 1,500 calls were picked up at the higher July $11 strike for an average premium of $0.15 per contract. Call buyers are well positioned to benefit should Micron’s shares rally following the release of MU’s third-quarter earnings report. Waves of put selling by bullish investors took place in the August and October contracts. Optimistic options traders shed 2,000 puts at the August $8.0 strike for an average premium of $0.22 apiece, sold 3,000 puts at the August $9.0 strike for an average premium of $0.45 each, and sold another 2,500 in-the-money puts at the higher August $10 strike for an average premium of $0.90 a-pop. Investors keep the premium received today if Micron’s shares trade above the strike prices previously detailed through August expiration day. Similar short positions were initiated in the October contract at the $8/$9/$10 strikes. Traders sold 2,100 in-the-money puts at the October $10 strike to pocket an average premium of $1.23 each. As with all plain-vanilla put selling, investors short puts at the October $10 strike walk away with the full $1.23 premium per contract as long as Micron’s shares trade above $10.00 through October expiration. Put sellers at this strike price are obliged to have shares of the underlying stock put to them at an effective price of $8.77 each in the event that the puts land in-the-money at expiration. Finally, bulls also purchased another 4,500 calls at the October $10 strike for an average premium of $1.12 per contract. Investors make money on the acquisition if MU’s shares rally 11.4% over the current price of $9.98 to surpass the average breakeven point on the calls at $11.12 by expiration day in October. Options implied volatility on the stock is down 5.5% to 54.65% as if 1:20 pm (ET) despite impending third-quarter earnings from the company.
AFL – Aflac, Inc. – Options traders initiated bullish positions on the largest supplemental health insurer today after the firm ditched all of its Greek sovereign debt at a loss in order to minimize the risk of additional writedowns. Aflac’s shares rallied as much as 5.98% to secure an intraday high of $46.20, but are currently up a lesser 3.15% to stand at $44.97 as of 12:20 pm (ET). Optimistic individuals sold short 1,500 puts at the July $42 strike to pocket an average premium of $0.57 per contract. Put sellers at this strike keep the full premium received on the transaction as long as Aflac’s shares exceed $42.00 through expiration day next month. Investors expecting shares of the insurer to continue to appreciate ahead of July expiration purchased 1,000 calls at the July $50 strike at an average premium of $0.19 per contract. Call coveters make money if, by expiration, shares of the underlying stock surge 11.6% over the current price of $44.97 to surpass the average breakeven point to the upside at $50.19.
BMY – Bristol-Myers Squibb Co. – Call buying and put selling on the global biopharmaceutical company indicates some options investors are preparing for a rally in the price of the underlying shares. Bullish positioning on the stock today took place after Bristol-Myers Squibb Co. and AstraZeneca PLC stated a late-stage clinical trial showed dapagliflozin, a diabetes drug candidate, was more effective at reducing blood sugar levels than placebo. The biopharmaceutical company’s shares are currently up 0.05% to $25.59 as of 12:35 pm (ET). Optimistic investors shed 1,300 puts at the July $24 strike for an average premium of $0.17 apiece, and also sold 4,200 puts at the higher July $25 strike to pocket an average premium of $0.40 per contract. Put sellers keep the premium received as long as BMY’s shares exceed the strike prices detailed above through expiration day in July. BMY-bulls expecting shares to rally significantly by September expiration picked up out-of-the-money call options. Traders purchased 1,300 calls at the September $26 strike for an average premium of $0.81 each. Shares must increase another 4.75% to surpass the average breakeven price of $26.81 in order for September $26 strike call buyers to start to make money. Bullish sentiment spread to the higher September $28 strike where roughly 3,100 calls were purchased at an average premium of $0.23 apiece. Investors long the higher-strike calls profit only if BMY’s shares surge 10.3%, shatter the current 52-week high of $27.07 on the stock, and trade above the average breakeven price of $28.23 by September expiration.
DELL – Dell, Inc. – The manufacturer of personal computers popped up on our ‘most active by options volume’ market scanner during morning trading after one bearish investor took action in the January 2012 contract. Dell’s shares are up 0.70% at $13.02 as of 12:45 pm (ET). It looks like the trader is taking profits off the table by selling-to-close a previously established long put position, and initiating a new bearish stance on the stock by purchasing a fresh batch of put contracts at a lower strike price. The investor appears to have originally purchased 5,000 puts at the January 2012 $12.5 strike for an average premium of $1.83 apiece back on January 13, 2010, when shares of the underlying stock were trading at a volume-weighted average price of $15.00. The subsequent erosion in the price of Dell’s shares inflated premium on the January 2012 $12.5 strike puts allowing the trader to sell all 5,000 lots today for an average premium of $2.325 each. Average net profits pocketed on the sale amount to $0.495 per contract. Next, the investor enacted a more bearish position on DELL by picking up 5,000 puts at the lower January 2012 $10 strike for an average premium of $1.36 a-pop. Profits start to amass on the new put stance if shares of the underlying stock plunge 33.6% from the current price of $13.02 to breach the average breakeven point on the puts at $8.64 by expiration day in January 2012.
