Today’s tickers: HIG, EW, GENZ, AWK, STEC, DELL, HTZ, DBRN & OVTI
HIG – Hartford Financial Services Group, Inc. – Call options on the insurance and financial services firm are flying off the shelves today with shares trading higher by as much as 2.95% to tie down an intraday high of $22.99. As of 2:20 pm ET, more than 14.1 calls have changed hands on HIG for each single put option in action on the stock thus far in the session. The sharp increase in demand for calls bumped up the insurer’s overall reading of options implied volatility 26.4% to today’s high of 56.57%. While some investors populating HIG are selling calls, the majority of calls traded were purchased by traders positioning for continue appreciation in the price of the underlying shares. Near-term optimists picked up roughly 7,500 calls at the September $23 strike for an average premium of $0.50 each. Call buyers at this strike make money if HIG’s shares rally above the average breakeven price of $23.50 by expiration day next Friday. Other bulls purchased some 4,600 calls at the September $24 strike for premium of $0.23 each. Another 2,800 calls were scooped up at the higher September $25 strike at an average premium of $0.16 a-pop. More than 10,800 calls changed hands at the September $26 strike versus previously existing open interest of just 3,300 lots. The vast majority of those calls, some 7,000 contracts, traded to the middle of the market at a premium of $0.12 apiece. Bullish sentiment on the insurance company spread to the October $24 strike where some 2,000 calls were coveted at an average premium of $0.76 each. Investors holding these contracts stand ready to accumulate profits if HIG’s shares jump 7.7% over today’s high of $22.99 to exceed the average breakeven price of $24.76 by October expiration. An additional 2,000 calls were picked up at the October $25 strike for premium of $0.70 a-pop. Traders long the calls make money if shares surge 11.8% to trade above $25.70 ahead of expiration day next month. Options traders exchanged more than 66,700 contracts on Hartford Financial Services Group by 2:30 pm ET.
EW – Edwards Life Sciences Corp. – The provider of products and technologies created to treat advanced cardiovascular disease popped up on our ‘hot by options volume’ market scanner after one options player initiated a sizeable bearish transaction in the November contract. Shares of the medical supplies company are currently down 0.80% to arrive at $59.29 as of 1:55 pm ET. The investor established a ratio put spread, buying 5,000 puts at the November $57.5 strike at a premium of $2.95 each, and selling 10,000 puts at the lower November $47.5 strike for premium of $0.75 per contract. The net cost of the pessimistic play amounts to $1.45 each. Thus, the responsible party is poised to profit should Edwards Life Sciences’ shares decline 5.5% from the current price of $59.29 to slip beneath the effective breakeven price of $56.05 by expiration day in November. Maximum potential profits of $8.55 per contract pad the put-spreader’s wallet as long as the price of the underlying stock plummets 19.9% to settle at $47.50 at expiration. The sharp increase in demand for put options on EW lifted the stock’s overall reading of options implied volatility 7% to 40.64% by 2:00 pm ET.
GENZ – Genzyme Corp. – A three-legged bearish options combination play on biotechnology company, Genzyme Corp., caught our eye today. It looks like one strategist is bracing for Genzyme’s shares to decline ahead of expiration in January 2011 perhaps because Sanofi-Aventis, the French drugmaker looking to purchase the biotech firm, said it is not at this time raising the $69.00 a share or $18.5 billion offer as some rumors suggested earlier this week. Genzyme’s shares slipped 0.55% in morning trading, but recovered this afternoon to stand 0.15% higher on the day at $70.74 as of 1:45 pm ET. The investor responsible for the three-legged transaction sold approximately 5,000 calls at the January 2011 $72.5 strike for premium of $2.70 each, purchased the same number of puts at the January 2011 $67.5 strike at a premium of $3.35 apiece, and shed 10,000 puts at the January 2011 $60 strike for premium of $1.40 a-pop. The trader pockets $2.15 in premium per contract on the transaction, and keeps the full amount as long as shares fail to rally above $72.50 by expiration day in January. Additional profits amass should GENZ shares decline 4.6% from the current price of $70.74 to trade beneath the effective breakeven point to the downside at $67.50 by expiration. Maximum potential profits of $9.65 per contract, which includes premium pocketed today, are available to the investor if the biotechnology firm’s shares plunge 15.2% to settle at $60.00 at expiration next year.
AWK – American Water Works Co., Inc. – Shares of the provider of water and wastewater services to residential, commercial and industrial customers in the U.S. and Canada inched up 0.30% today to a high of $22.63. The firm appeared on our ‘hot by options volume’ market scanner during the second half of the session after one strategist initiated a bullish play in the December contract. It looks like the investor sold 3,000 puts at the December $22.5 strike to pocket premium of $1.00 apiece. The trader keeps the full premium received on the sale as long as American Water Works’ shares exceed $22.50 through expiration day in the final month of the year. Put selling, in this case, indicates the investor is happy to have shares of the underlying stock put to him at an effective price of $21.50 each in the event that puts land in-the-money at expiration.
STEC – STEC, Inc. – Call options on the global provider of enterprise-class Flash solid-state drives are in high demand today amid rumors personal-computer maker, Dell, may be interesting in making a bid for the company. STEC’s shares increased as much as 5.1% earlier to attain an intraday high of $12.18 before cooling slightly in afternoon trading to stand 2.00% higher on the day at $11.82 as of 1:10 pm ET. Investors hoping to see STEC extend gains ahead of September expiration picked up approximately 3,000 calls at the September $12 strike for an average premium of $0.35 each. Call buyers at this strike make money if shares rally 4.5% over the current price of $11.82 to surpass the average breakeven point to the upside at $12.35 by expiration day next Friday. Bullishness spread to the September $13 strike where traders purchased some 1,500 calls at an average premium of $0.18 a-pop. Investors long the calls are prepared to profit should STEC’s shares jump 11.5% to trade above the average breakeven price of $13.18 by September expiration. The overall reading of options implied volatility on the SSD maker stands 15.6% higher as of 1:15 pm ET to arrive at 62.42%.
DELL – Dell, Inc. – Shares of the world’s third-largest personal computer maker fell as much as 3.5% this morning to touch an intraday low of $11.69 after analysts at Morgan Stanley, citing global PC weakness due to tablet competition, cut their rating on Dell to ‘underweight’ from ‘equal-weight.’ One bearish options trader is positioning for shares to head lower ahead of October expiration, but does not appear to expect the stock to collapse any time soon. The investor initiated a ratio put spread, buying 4,100 now in-the-money puts at the October $12 strike at a premium of $0.55 each, and selling 8,200 puts at the lower October $11 strike for a premium of $0.21 apiece. Net premium paid to establish the ratio spread amounts to $0.13 per contract. Thus, the bearish player is poised to profit should Dell’s shares slip beneath the effective breakeven price of $11.87 by expiration day next month. Maximum potential profits of $0.87 per contract are available should shares shed another 8.00% to settle at $11.00 at expiration. In order to attain maximum profits on the position, shares of the underlying stock must fall through the current 52-week low of $11.34, set on August 24, 2010.
HTZ – Hertz Global Holdings, Inc. – Bullish options traders are loading up on Hertz Global call options this morning to position for a substantial medium-term rally in the price of the underlying shares. The second-largest U.S. car rental company’s shares rallied 3.05% in the first half of the trading session to secure an intraday high of $10.11. Share price appreciation today follows reports Thursday that a request by investors in Dollar Thrifty Automotive Group, Inc., Hertz’s $1 billion proposed takeover target, to stop a September 16 shareholder vote regarding the sale of the company to Hertz was rejected by a Delaware judge. Dollar Thrifty shareholders sought an injunction in order to reconsider a competing bid from Avis Budget Group, Inc. Bullish options players, perhaps emboldened by the judge’s decision, flocked to Hertz in morning trading to prepare for shares to head higher in the remainder of 2010. Investors purchased at least 12,200 calls at the December $12.5 strike for an average premium of $0.57 each. Call buyers stand ready to make money should HTZ shares surge 29.3% in the next several months to exceed the average breakeven price of $13.07 by December expiration. Hertz’s shares last traded above $13.07 back on May 13, 2010.
DBRN – Dress Barn, Inc. – Bulls are trying call options on for size at Dress Barn today to position for shares of the operator of women’s apparel specialty stores to rally ahead of September expiration. Investors are likely taking bullish stance on DBRN ahead of the firm’s fourth-quarter earnings report scheduled for release after the closing bell on September 15, 2010. Dress Barn’s shares are currently up 0.30% to stand at $22.71 as of 12:30 pm ET. It looks like traders picked up approximately 1,500 in-the-money calls at the September $22.5 strike for an average premium of $0.90 apiece. Call buyers profit if the retailer’s shares rally 3.00% over the current price of $22.71 to exceed the effective breakeven price of $23.40 ahead of expiration next Friday. Options implied volatility on the stock is up 5.6% at 41.65% in early afternoon trading.
OVTI – OmniVision Technologies, Inc. – Shares in semiconductor image sensor devices manufacturer, OmniVision Technologies, fell as much as 7.2% in the first half of the trading day to reach an intraday low of $18.42, the lowest traded price since June 11. It looks like one options investor was prepared for the plunge in price and took profits off the table by rolling a previously established long put stance to a lower strike price in the October contract. The put player likely accumulated a total of 3,000 long puts at the October $24 strike for an average premium of $2.58 each starting on August 30, 2010, when OVTI shares were trading at a volume-weighted average price of $22.47. The subsequent erosion in the price of the underlying stock inflated premium on the deep-in-the-money puts. Thus, the investor was able to sell all 3,000 puts at that strike today at a richer premium of $4.70 a-pop. Net profits on the closing sale amount to an average of $2.12 per contract. Next, the trader braced for continued bearish movement in the price of OVTI shares by picking up a fresh batch of 3,000 in-the-money puts at the lower October $20 strike at a premium of $1.90 apiece. Profits on the new position start to accumulate for the investor if the semiconductor maker’s shares fall another 1.7% from today’s low of $18.42 to trade below the average breakeven price of $18.10 by October expiration day.
