Today’s tickers: RIMM, HRB, CAT, DF, XLE, SKS, OCR & NEM
RIMM – Research in Motion, Ltd. – Shares in BlackBerry maker, Research in Motion Ltd., took a severe beating today after a Sanford C. Bernstein Ltd. survey revealed more firms are choosing rival devices such as the iPhone, a sign the firm is relinquishing its share of the corporate market to its competitors. RIMM’s shares dropped 6.30% to an intraday- and new 52-week low of $42.72 in the final hour of trading. The price of the underlying stock, which reached a 13-month high of $88.08 on September 23, 2009, has since collapsed 51.5% lower to reach today’s value of $42.72. But, one options trader populating the longer-dated January 2011 contract today positioning for RIMM’s shares to nearly halve again by expiration. The investor initiated a bearish put butterfly spread, buying 1,100 puts at the January 2011 $27.5 strike for premium of $0.80 apiece, selling 2,200 puts at the January 2011 $22.5 strike for premium of $0.37 per contract, and buying 1,100 puts at the January 2011 $17.5 strike for premium of $0.18 each. The net cost of the spread amounts to $0.24 per contract. The investor stands prepared to accumulate profits if shares of the mobile device maker plummet 36.2% from the current price to breach the effective breakeven point at $27.26 by expiration day. Maximum potential profits of $4.76 per contract are safe inside the trader’s piggybank if the Canadian company’s shares collapse 47.3% lower to settle at $22.50 at expiration. The majority of options traders populated the near-term September contract where the September $40/$42.5/$45 strike puts were the most active.
HRB – H&R Block, Inc. – Bearish investors bombarded the provider of tax, banking, business and consulting services in afternoon trading after Standard & Poor’s Ratings Services lowered its rating outlook on the company to stable from positive. The downgrade weighed heavily on HRB’s shares, which fell as much as 6.20% to an intraday- and new 52-week low of $12.54. Shares are currently down 4.95% at $12.71 with one hour remaining before the closing bell. Given the new 52-week low of $12.54, HRB’s shares are down 21.5% since trading at $15.97 on August 2, 2010. The stock has lost a total of 46.15% of its value since January 21, 2010, when shares reached the current 52-week high of $23.29. Investors wary of continued bearish movement in the price of the underlying are picking up put options on H&R Block like they are going out of style. Approximately 5.9 puts changed hands on the stock for each single call traded as of 3:05 pm ET. More than 22,000 puts traded at the October $10 strike versus previously existing open interest at that strike of just 340 put options. It looks like bears bought at least 11,700 of those puts for an average premium of $0.18 apiece. Another 7,400 puts traded to the middle of the market at the October $10 strike. Put buyers are poised to profit should HRB’s shares plunge 22.7% lower to breach the average breakeven price of $9.82 by October expiration. Investors coveted 2,300 puts at the higher October $11 strike for premium of $0.29 per contract. Longer-term bearish players picked up roughly 4,300 puts at the January 2011 $10 strike by shelling out an average premium of $0.49 a-pop. The explosion in demand for put options on the stock today helped lift HRB’s overall reading of options implied volatility 19% to 46.33%. Options traders exchanged more than 45,200 contracts on HRB versus overall existing open interest on the stock of 104,244 lots by 3:10 pm ET.
CAT – Caterpillar, Inc. – Put action on the machinery maker today suggests shares could take a turn for the worse by October expiration. CAT’s shares inched up 1.7% earlier in the session to touch an intraday high of $65.85, but are currently higher on the day by a lesser 0.70% to stand at $64.94 as of 3:35 pm ET. The pessimistic options player prepared to face potential bumps in the pavement by initiated a debit put spread, buying about 2,000 now in-the-money contracts at the October $65 strike for an average premium of $3.09 each, and selling roughly the same number of puts at the lower October $55 strike at an average premium of $0.62 a-pop. The net cost of putting on the trading amounts to $2.47 per contract. Thus, the trader makes money – or realizes downside protection – if CAT’s shares fall 3.7% to slip beneath the average breakeven price of $62.53 by October expiration. Maximum potential profits of $7.53 per contract are available to the options strategist should shares tumble 15.3% in the next couple of months to trade below $55.00. Options implied volatility on Caterpillar is net up 3.5% at 35.77% with 20 minutes remaining in the trading day.
DF – Dean Foods Co. – Bulls breakfasted on Dean Foods’ call options in the first half of the trading session with shares of the processor and distributor of milk and dairy products rallying as much as 12.8% to an intraday high of $10.59. Investors populating Dean Foods Co. today exchanged nearly 5 calls on the stock to each single put option that changed hands as of 12:50 pm ET. Shares are up 6.6% at midsession to stand at $10.45. Optimistic options players hoping to see Dean Foods’ shares continue higher ahead of expiration day next month purchased at least 1,000 now in-the-money calls at the September $10 strike for an average premium of $0.44 each. Call buyers make money as long as the price of the underlying stock exceeds the average breakeven price of $10.44 through expiration in September. The surge in demand for options on Dean Foods helped raise the stock’s overall reading of options implies volatility 36.8% to 58.10% by 12:55 pm ET.
XLE – Energy Select Sector SPDR ETF – One optimistic options trader is hoping to see shares of the XLE gravitate back up to the current 52-week high on the fund of $62.30, attained on April 26, 2010, by December expiration. Shares of the XLE, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the Energy Select Sector of the S&P 500 Index, increased 0.15% to $51.42 by 11:45 am ET. Earlier shares rallied as much as 0.50% to an intraday high of $51.60. Energy companies in the Index are primarily engaged in developing and producing crude oil and natural gas, as well as drilling and other energy-related services. It looks like the long-term bullish investor expects shares of the fund to swell, perhaps because he expects heating-season to be fully underway by the end of 2010, or perhaps on reports hurricane-season is starting to pick up as summer draws to a close. The trader purchased 20,000 calls at the December $57 strike for premium of $1.02 apiece, and sold 20,000 calls at the higher December $62 strike at a premium of $0.23 each. The net cost of the transaction amounts to $0.79 per contract. Shares of the ETF must rally at least 12.4% over the current price of $51.42 in order for the call-spreader to break even on the spread at $57.79. Over-and-above $57.79, the investor reels in profits, booking maximum potential gains of $4.21 per contract if shares of the XLE surge 20.6% in the next four months to exceed $60.00 by expiration day in December.
SKS – Saks, Inc. – Frenzied options trading commenced right out of the gate this morning on news the retailer of luxury goods may receive a buyout offer to the tune of $1.7 billion. Investors scooped up both call and put options on the stock throughout the first half of the session as shares exploded to the upside, rallying as much as 34.00% at the open, to secure an intraday high of $8.85. The stock is currently up 22.7% at $8.10 as of 12:10 pm ET. The sharp rise in demand for options on SKS and uncertainty regarding the status of potential buyout offers fueled a 49.00% increase in the stock’s overall reading of options implied volatility to a high of 86.56% in the first 20 minutes of trading. The majority of options players populating Saks are picking up put options. Perhaps investors are long the stock and seeking to lock in profits on the substantial run up in shares. An alternative motivation for put buying could be that traders expect Saks’ shares to tumble if confirmed buyout offers fail to surface. Trading traffic in puts on the luxury goods retailer is heaviest at the September $9.0 strike where nearly 9,000 in-the-money contracts changed hands by 12:20 pm ET. It looks like the majority of these puts were purchased at an average premium of $1.20 each. Put buying spread all the way out to the January 2011 contract where investors picked up some 4,600 lots at the January 2011 $7.50 strike for an average premium of $0.80 each. All-in-all, options traders exchanged more than 2.3 puts on Saks today for each single call option in play thus far in the session. Notable call volume was observed at the September $9.0 strike as traders bought and sold approximately equal portions of the 5,500 lots traded at that strike by early afternoon.
OCR – Omnicare, Inc. – The provider of specialty pharmaceutical products and support services popped up on our ‘hot by options volume’ market scanner in morning trading after one long-term bullish player purchased a debit call spread in the March 2011 contract. Omnicare’s shares are down 0.55% to stand at $19.37 as of 11:30 am ET. The options optimist purchased 5,000 calls at the March 2011 $25 strike for premium of $0.78 apiece, and sold the same number of calls at the higher March 2011 $30 strike at a premium of $0.15 each. The net cost of establishing the spread amounts to $0.63 per contract. Thus, the investor is poised to profit should Omnicare’s shares surge 32.3% over the current price of $19.37 to surpass the effective breakeven price of $25.63 by expiration next year. The trader could wind up walking away with maximum potential profits of $4.37 per contract if the price of the underlying stock jumps 54.8% to trade above $30.00 in the next seven months to expiration. Omnicare’s shares last traded above $30.00 back on April 23, 2010. In the four-plus months since April 23, the stock has plunged more than 35.4% to reach today’s value of $19.37.
NEM – Newmont Mining Corp. – Gold producer, Newmont Mining Corp., attracted hoards of bullish options traders in the first half of the trading day with the price of its shares rising as much as 3.1% to touch an intraday high of $61.79. Investors employed a couple of different bullish strategies in the September contract in order to position for continued appreciation in the price of the underlying shares through expiration next month. Plain-vanilla call buyers picked up roughly 1,000 calls at the September $62.5 strike for an average premium of $1.12 each. Investors long the calls make money if Newmont’s shares rally another 2.95% to surpass the average breakeven price of $63.62 by expiration. The breakeven price on the calls exceeds the current 52-week high on the stock of $63.38 by a margin of $0.24. Bullishness spread to the higher September $65 strike where another 2,000 calls were purchased at an average premium of $0.50 a-pop. Traders long the higher-strike calls are prepared to profit as long as NEM’s shares surge 6.00% over today’s high of $61.79 and trade above the average breakeven price of $65.50 by September expiration day. Another bullish tactician opted to engage in covered call selling. This trader appears to have sold 750 calls at the September $65 strike for an average premium of $0.52 apiece. Shares at the time of the transaction were trading at around $61.36, and the premium received on the sale of the calls effectively reduces the price of getting long the stock to about $60.84 a share. Thus, the responsible party may walk away with maximum gains of 6.8% on the rally in the price of the underlying if shares exceed $65.00, and the shares are called from him at expiration next month. Bulls populating Newmont Mining Corp. today exchanged more than 3.7 calls on the stock for each single put option in play.
