Today’s tickers: LLNW, LPS, TEVA, XRT, MON & AEO
LLNW – Limelight Networks, Inc. – Call options on the provider of Internet distribution services for video, music, games and other media and entertainment content are in high demand today with shares rising as much as 14.8% at the start of the trading session to touch an intraday high of $6.35. Limelight’s shares jumped after “Mad Money” host Jim Cramer said he’s bullish on the firm’s long term prospects. LLNW’s shares tapered off significantly during the course of the day and are currently up a lesser 5.60% to stand at $5.84 with less than 30 minutes to go before the final bell. Bullish investors picked up 1,000 in-the-money calls at the October $5.0 strike for an average premium of $1.11 each. Call buyers at this strike are poised to profit should LLNW’s shares exceed the effective breakeven price of $6.11 by October expiration. Trading traffic in calls was heaviest, however, at the December $5.0 strike where some 4,600 in-the-money calls were purchased at an average premium of $1.51 a-pop. Investors long the calls make money if the price of the underlying stock jumps 11.5% over the current price of $5.84 to surpass the average breakeven point at $6.51 by expiration day in October. Options implied volatility is still up 12.1% on the day to arrive at 83.75%, but earlier jumped 25.92% to touch a high of 94.10% today.
LPS – Lender Processing Services, Inc. – The provider of integrated technology and outsourced services to the mortgage lending industry attracted a bevy of long-term bearish put buyers this afternoon. Shares are down 0.40% at $33.31 heading toward the close, but did manage to eke out an early-morning rally of 0.25% to touch an intraday high of $33.52 perhaps after being rated new ‘buy’ at Fagenson & Co. with a 12-month target share price of $38.00. Put players may be buying the puts outright because they expect the firm’s shares to decline, or they could be building up downside protection to provide long-term insurance on sizeable positions in the underlying shares. It looks like investors purchased approximately 9,500 put options at the March 2011 $30 strike for an average premium of $2.00 apiece. Traders holding these contracts are prepared to profit should Lender’s shares plummet 15.9% from the current price of $33.31 to breach the effective breakeven point to the downside at $28.00 by expiration day next March. LPS shares would need to fall below the current 52-week low on the stock of $29.22 for investors to start to make money or before downside protection kicks in.
TEVA – Teva Pharmaceutical Industries Ltd. – Shares of the Israel-based manufacturer of generic and branded drugs are up 0.20% as of 11:45 am ET to stand at $52.70 despite reports that the firm failed to win U.S. approval for a medicine comparable to Amgen’s Neupogen, a drug used to fight infections in chemotherapy. TEVA popped up on our scanners after one options strategist initiated a three-legged bullish play in the November contract. The investor essentially sold put options in order to partially offset the cost of buying a call spread. The trader picked up 5,000 in-the-money calls at the November $50 strike for a premium of $3.75 each, sold 5,000 calls at the higher November $55 strike at a premium of $0.93 apiece, and shed 5,000 puts at the November $50 strike for premium of $0.92 a-pop. Net premium paid to establish the spread amounts to $1.90 per contract. Thus, the bullish player is poised to profit should TEVA’s shares trade above the effective breakeven price of $51.90 through November expiration. Maximum potential profits of $3.10 per contract pad the investor’s wallet if the drug maker’s shares rally 4.40% over the current price of $52.70 to exceed $55.00 by expiration day.
XRT – SPDR S&P Retail ETF – Pessimism on the retail fund is apparent today following the implementation of the oft-employed ratio put spread strategy in the December contract. Shares of the XRT, an exchange-traded fund designed to replicate the performance of the S&P Retail Select Industry Index, are down 1.05% at $41.58 as of 12:00 pm ET. The bearish strategist purchased 5,000 now in-the-money puts at the December $42 strike at a premium of $1.91 each, and sold 10,000 puts at the lower December $36 strike for a premium of $0.68 apiece. The net cost of the transaction amounts to $0.55 per contract. The trader responsible for the spread stands ready to accrue profits should the XRT’s shares fall another 0.625% from the current price to breach the effective breakeven point to the downside at $41.32 by expiration day in December. Maximum potential profits of $5.45 per contract are available to the pessimistic player if the fund’s shares plunge 13.40% lower to settle at $36.00 at expiration. Options implied volatility on the retail fund is up 3.8% at 28.03% at the start of afternoon trading.
MON – Monsanto Co. – A repeat performance of a bullish transaction initiated on the world’s largest seed producer yesterday indicates some semblance of consensus with investors looking for Monsanto’s shares to rebound substantially by November expiration. Shares of the St. Louis, MO-based firm are up 0.20% at $48.09 as of 11:10 am ET. Earlier this week, Monsanto’s shares fell sharply on concerns that the company’s new SmartStax corn seeds are not performing as well as expected. One Wednesday one optimistic trader purchased a 5,000-lot November $55/$60 call spread at a net cost of $0.58 per contract. Today, another bullish player added to the foundation by picking up a 4,500-lot call spread at the same strike prices by shelling out a net premium of $0.54 per contract. The investor responsible for today’s bullish play is positioned to profit should Monsanto’s shares surge 15.5% over the current price of $48.09 to exceed the effective breakeven point at $55.54 by November expiration. Maximum potential profits of $4.46 per contract are available to the investor if MON’s shares jump 24.80% to exceed $60.00 by expiration day.
AEO – American Eagle Outfitters, Inc. – Call options on the retailer of clothing and accessories are fashionable with bullish players this morning with the price of the underlying stock climbing as much as 4.70% to an intraday high of $15.61. AEO’s shares are currently up 2.30% at $15.25 as of 10:55 am ET. Options traders exchanged more than 9 calls on the stock for each single put in play thus far in the session. Call volume is heaviest at the near-term October $16 strike where more than 6,900 calls changed hands versus previously existing open interest of just 665 contracts. It looks like investors purchased 4,990 of those October $16 strike calls for an average premium of $0.28 apiece. Call buyers make money if American Eagle’s shares rally 6.75% over the current price of $15.25 to surpass the average breakeven point to the upside at $16.28 by October expiration. Optimism spread to the November $16 strike where 1,500 calls were scooped up for an average premium of $0.60 each. Finally, some 5,000 of the November $17.5 strike call options were traded by both buyers and sellers for an average premium of $0.27 apiece. Call sellers are expecting AEO’s shares to trade below $17.50 through November expiration while buyers are hoping to see the retailer’s rally continue. The surge in demand for calls on American Eagle bumped up the stock’s overall reading of options implied volatility 9.6% to 42.36% by 11:05 am ET.
