Today’s tickers: CAL, RSH, FLEX & ADM
CAL – Continental Airlines, Inc. – Bullish options strategists initiated a couple of put credit spreads on Continental Airlines today with shares of the U.S. air carrier flying 4.35% higher to $24.00 as of 12:30 pm (ET). Investors populating CAL options are forecasting clear skies for the firm through September expiration and expect the price of the underlying shares to remain at least above $20.00 for the next few months. One of the bullish spreads involved the sale of 5,000 puts at the August $20 strike for a premium of $0.56 apiece, marked against the purchase of the same number of puts at the lower August $18 strike for a premium of $0.32 each. The investor responsible for the transaction pockets a net credit of $0.24 per contract, and keeps the full amount received today as long as CAL’s shares exceed $20.00 through expiration day next month. The trader receives the $0.24 credit in exchange for bearing the risk that shares crash and burn ahead of expiration. Losses on the position start to accumulate if Continental Airlines’ shares plunge 17.66% from the current price of $24.00 to breach the effective breakeven point to the downside at $19.76. The investor is slammed with maximum potential losses of $1.76 per contract should shares plummet 25% to trade below $18.00 ahead of expiration in August. An identical 5,000-lot put credit spread was established in the September contract. This transaction yields a net credit of $0.35 per contract to the responsible party if shares remain above $20.00, and results in maximum potential losses of $1.65 per contract if CAL’s shares slip beneath $18.00 by expiration day in September.
RSH – RadioShack Corp. – Call options on the retailer of consumer electronics goods and services are flying off the shelves this morning with RadioShack’s shares trading 3.95% higher on the day to stand at $22.37 as of 11:15 am (ET). Earlier in the session RSH shares rallied more than 7.6% to secure an intraday high of $23.16. Bullish options investors expecting continued appreciation in the price of the underlying stock this week picked up approximately 2,200 calls at the July $22.5 strike for an average premium of $0.60 apiece. Call buyers at this strike stand ready to amass profits should the retailer’s shares exceed the average breakeven price of $23.10 by expiration on Friday. Traders anticipating a more dramatic upward move in share price purchased 1,700 calls at the higher July $24 strike for an average premium of $0.37 a-pop. RadioShack’s shares must increase at least 8.94% over the current price of $22.37 and surpass the stock’s current 52-week high of $24.00 in order for investors long the July $24 strike calls to make money above the effective breakeven point to the upside at $24.37 by July expiration. Optimists also scooped up at least 1,000 calls at the August $25 strike for an average premium of $0.67 each. Investors long the call options are poised to profit should RadioShack’s shares surge 14.75% to trade above the average breakeven price of $25.67 by August expiration day.
FLEX – Flextronics International, Ltd. – The provider of electronics manufacturing services to original equipment manufacturers of a range of products in a variety of industries popped up on our ‘hot by options volume’ market scanner in the first half of the trading session due to frenzied call buying activity in the January 2011 contract. Flextronics’ shares are currently up more than 4.7% to arrive at $6.44 by 11:30 am (ET). Shares are up sharply one day after the firm was rated new ‘buy’ with a 12-month target share price of $9.00 at Stifel Nicolaus, and two trading days after FLEX was rated new ‘overweight’ with a 6-month target share price of $7.00 at JPMorgan. Long-term bullish traders positioning for Flextronics’ shares to appreciate significantly by expiration in January 2011 scooped up approximately 6,500 calls at the January 2011 $7.5 strike for an average premium of $0.48 per contract. Investors long the calls make money if, by expiration, FLEX’s shares rally more than 23.9% to surpass the average breakeven point at $7.98. The sharp increase in demand for call options on the stock lifted the overall reading of options implied volatility on FLEX 11.6% to 47.39% by 11:40 am (ET).
ADM – Archer-Daniels Midland Co. – Shares of one of the world’s largest processors of oilseeds, corn, wheat, cocoa and other feedstuffs are up 1.7% to stand at $27.14 as of 11:45 am (ET) after earlier rallying more than 2.1% to touch an intraday high of $27.25. Investors itching for continued bullish movement in the price of the underlying stock purchased call options on the vegetable oil manufacturer this morning. Traders picked up approximately 4,400 calls at the now in-the-money September $27 strike for an average premium of $1.24 apiece. Call buyers make money as long as Archer Daniels’ shares rally 4.05% over the current price of $27.14 and trade above the average breakeven point on the calls at $28.24 ahead of expiration day in September.
