Today’s tickers: IPG, UPS, ATML, CBS, CHL, CAVM, ROST & WL
IPG – Interpublic Group Companies, Inc. – Long-term bullish trading in Interpublic Group LEAPs indicates one strategist is preparing for the price of the underlying stock to climb substantially higher by expiration day in January 2012. Shares of the advertising and marketing services firm rose 4.80% to $10.46 by 2:50 pm ET. The options strategist appears to have enacted a delta neutral transaction, buying 210,000 shares of the underlying stock at $10.40 each, spread against the sale of 5,000 calls at the January 2012 $12.5 strike for an average premium of $0.975 apiece on a 0.42 delta. The sale of the calls can be considered a financing mechanism as well as a potential exit strategy on the long position in shares. The investor could wind up having the shares called from him at $12.50 each in the event that at expiration IPG’s shares exceed $12.50. In this case, the trader would realize gains of 32.625% on the rally in shares from the reduced purchase price of $9.425 a share up to $12.50 a share. Interpublic’s overall reading of options implied volatility is down 3.4% at 40.65% one hour before the final bell. The marketing services provider announces its third-quarter results before the market opens on October 29, 2010.
UPS – United Parcel Service, Inc. – A sizeable near-term bullish transaction involving 23,000 call options and a large chunk of UPS shares caught our eye today. Shares of the world’s largest package delivery company, which announced Friday it plans to raise the non-contractual UPS Freight rate by 5.9% starting October 18, are currently up 3.20% to stand at $68.25 as of 2:30 pm ET. It looks like the investor responsible for the transaction established a covered call on the stock to position for the price of the underlying shares to continue higher ahead of October expiration. The trader purchased approximately 322,000 shares at $67.57 each and sold 23,000 calls at a premium of $0.19 apiece on a 0.14 delta. The sale of the call options reduces the cost of getting long the stock. Additionally, the short stance in calls serves as an effective exit strategy for the trader should UPS shares soar above $70.00 ahead of October expiration. The investor is prepared to have shares called from him at $70.00 each, which would result in maximum potential profits of 3.89%. However, the trader may be taking a longer-term bullish stance on the stock, and hoping to see shares trade below $70.00 through expiration day. In this scenario, the calls expire worthless and the investor may choose to maintain the long position in UPS shares in order to ride along with whatever rally he expects to come his way in the future. The current 52-week high on United Parcel Service is $70.89, attained back on May 3, 2010.
ATML – Atmel Corp. – One long-term bullish options strategist took profits off the table today by rolling a previously established long call position on the manufacturer of semiconductor products up to a higher strike price in the February 2011 contract. Atmel’s shares surged 7.90% during the session to secure an intraday- and new 52-week high of $8.61. It looks like the investor originally accumulated 10,000 long calls at the February 2011 $7.5 strike in the latter half of September for an average premium of $0.82 per contract when ATML shares were trading between $6.97 and $8.05. Today, the trader sold 10,000 now in-the-money calls at the Feb. $7.5 strike for an average premium of $1.375 apiece, booking average net profits of $0.555 per contract. The investor extended bullish sentiment on Atmel Corp. by scooping up 10,000 fresh calls at the higher February 2011 $9.0 strike at a premium of $0.70 each. Profits start to amass on the new bullish stance if the semiconductor maker’s shares rally 12.65% over today’s high of $8.61 to surpass the average breakeven price of $9.70 by expiration day in February. Atmel is scheduled to report third-quarter earnings after the final bell on November 4, 2010.
CBS – CBS Corp. – Shares of the owner of the most-watched U.S. broadcast network rallied as much as 6.30% in the first half of the trading session to secure an intraday- and new 52-week high of $17.42 after analysts at Nomura Holdings Inc. initiated a ‘buy’ rating on the stock with a target share price of $22.00. CBS Corp. shares are currently up 2.85% at $16.86 as of 1:30 pm ET. Bullish options investors were quick to position for continued appreciation in the price of the underlying shares today. One optimistic trader established a ratio call spread, buying 2,000 calls at the December $17 strike for a premium of $1.30 each, and selling 4,000 calls at the December $19 strike at a premium of $0.45 a-pop. The net cost of the transaction amounts to $0.40 per contract. Thus, the investor is poised to profit should shares in CBS increase 3.20% over the current price of $16.86 to surpass the effective breakeven point at $17.40 by expiration day in December. Maximum potential profits of $1.60 per contract are available to the trader if shares jump 12.70% to settle at $19.00 at expiration. The greater proportion of sold call options exposes the bullish player to losses in the event that shares blow straight through $19.00 in the next few months. Losses start to amass if shares surge 22.20% over the current price to exceed $20.60 ahead of expiration day. The overall reading of options implied volatility on CBS shrank 4.00% to 40.26% by 1:35 pm ET. CBS Corp. is slated to report third-quarter earnings after the final bell rings on November 4, 2010.
CHL – China Mobile, Ltd. – Shares of the mobile telecommunications company that offers services in Mainland China and Hong Kong are up 1.90% at $52.74 as of 11:40 am ET. An investor expecting the price of the underlying stock to reach a new 52-week high by January expiration appears to have established a bullish risk reversal. A number of recent positive signals indicating stable momentum in the rapidly-growing Chinese economy have helped China Mobile’s shares climb higher. Premier Wen Jiabao said China will boost domestic demand, reports revealed that China’s service industries expanded, and the manufacturing PMI released on October 1 jumped to a four-month high. A bullish options strategist hoping to see more good news going forward positioned for shares in China Mobile to surge over the next four months. It looks like the trader sold 4,686 puts at the January 2011 $47.5 strike for a premium of $0.90 each in order to buy the same number of calls at the January 2011 $57.5 strike at a premium of $0.90 apiece. The trade positions the bullish player to make money if CHL’s shares jump 9.025% over the current price of $52.74 to trade above the effective breakeven price of $57.50 by expiration day in January. China Mobile’s shares last traded up at their current 52-week high of $54.70 back on August 17, 2010.
CAVM – Cavium Networks, Inc. – Investors initiated put spreads on the provider of semiconductor processors this morning ahead of the firm’s third-quarter earnings report, scheduled for release after the closing bell on October 27, 2010. Cavium’s shares increased 1.70% to stand at $29.43 by 11:30 am ET. Put spreaders may be establishing outright bearish bets on the stock heading into earnings, or could be building up downside protection on long positions in CAVM shares. Traders purchased 17,000 puts at the November $29 strike for an average premium of $1.75 each, and sold the same number of puts at the lower November $25 strike at an average premium of $0.40 apiece. Put players paid a net premium of $1.35 per contract for the transaction. Thus, investors start to make money if Cavium’s shares fall 6.05% from the current price of $29.43 to breach the effective breakeven point on the spread at $27.65 by November expiration. Maximum potential profits of $2.65 per contract are available to investors if CAVM’s shares plunge 15.05% lower to trade under $25.00 by expiration day next month.
ROST – Ross Stores, Inc. – The operator of off-price retail apparel and home accessories stores popped up on our ‘hot by options volume’ market scanner after one options strategist initiated a ratio put spread in the November contract. Shares are currently up 0.25% at $54.59 just before 12:00 pm ET. Put options utilized in the spread expire on November 19, which is one day after Ross Stores is scheduled to report third-quarter earnings. The investor purchased 2,500 in-the-money puts at the November $55 strike for an average premium of $3.025 apiece, and sold 5,000 puts at the November $50 strike for a premium of $1.00 each. Net premium paid to establish the transaction amounts to $1.025 per contract. Thus, the investor is positioned make money if ROST shares decline 1.1% from the current price to slip beneath the effective breakeven point to the downside at $53.975 by expiration day next month. Maximum potential profits of $3.975 per contract are available to the trader should shares plummet 8.40% to settle at $50.00 at expiration. The greater proportion of sold puts indicates the trader is not expecting shares to collapse under $46.205, or the price at which losses would start to accumulate to the downside.
WL – Wilmington Trust Corp. – Shares of the financial holding company fell as much as 5.00% in morning trading to touch down at an intraday- and new 52-week low of $8.33. The stock has parsed a portion of earlier losses to trade 1.95% lower on the day at $8.60 as of 12:15 pm ET this afternoon. Investors expecting Wilmington’s shares to continue lower ahead of November expiration scooped up put options. Options traders have thus far exchanged 6,154 contracts on the financial firm, which is substantial in comparison to the 7,600 lots of previously existing open interest on the stock. Put players appear to have purchased approximately 4,400 puts at the November $7.5 strike for an average premium of $0.39 each. Investors long the puts are prepared to make money should WL shares fall another 17.325% from the current price of $8.60 to breach the average breakeven point at $7.11 by expiration day. Options implied volatility on the stock jumped 28.86% to 60.59% in the second half of the trading session. Wilmington Trust Corp. is scheduled to report third-quarter earnings ahead of the opening bell on October 22, 2010.
