Today’s tickers: JPM, UPS, GM, SNDK, FO & SVU
JPM – JPMorgan Chase & Co. – One options strategist expecting a near-term turnaround in JPMorgan’s shares purchased a call spread in the December contract today. Shares of the financial services firm are currently down 0.75% to stand at $37.62 in the final hour of the trading session. It looks like the investor picked up 7,000 calls at the December $38 strike at a premium of $0.80 each, and sold the same number of calls at the higher December $40 strike for a premium of $0.22 apiece. Net premium paid to initiate the bullish spread amounts to $0.58 per contract, thus positioning the trader to make money should shares in JPMorgan climb 2.55% to surpass the effective breakeven price of $38.58 by December expiration day. The call-spreader stands prepared to accumulate maximum potential profits of $1.42 per contract if shares rally 6.3% over the current price of $37.62 to trade above $40.00 by expiration day in the final month of the year.
UPS – United Parcel Service, Inc. – Bullish options traders are scooping up in- and out-of-the-money call options on UPS this afternoon. Shares of the package delivery services provider increased as much as 0.80% today to hit an intraday- and new 52-week high of $70.44. The stock is currently up 0.40% to arrive at $70.15 as of 1:50 pm. More than 25,700 option contracts have changed hands on UPS thus far today, with more than 4.25 calls exchanged on the stock for each single put contract that has traded. Near-term bulls purchased more than 1,400 now in-the-money calls at the December $70 strike for an average premium of $1.16 each. Optimists looked up to the higher December $72.5 strike where more than 13,000 calls changed hands versus previously existing open interest of 4,958 contracts. It looks like the majority of these contracts were purchased for an average premium of $0.33 apiece. Call buyers at this strike make money if shares in UPS jump 3.8% to trade above the average breakeven point to the upside at $72.83 by expiration day next month. The $72.5 strike calls expiring in January 2011 were also popular, with bullish players paying an average premium of $0.95 apiece to take ownership of more than 1,275 contracts. The surge in demand for calls on United Parcel Service, Inc. lifted the stock’s overall reading of options implied volatility 6.7% to 20.78% by 1:55 pm in New York.
GM – General Motors Co. – Investors initiated both bullish and bearish strategies on General Motors this morning using call and put options expiring in January 2011. GM’s shares fell as much as 1.3% at the start of the session to touch an intraday low of $33.36, but have since recovered to stand 0.35% higher on the day at $33.92 as of 11:40 am in New York. One options player headed straight for GM put options within the first 20 minute of the trading day. The investor established a ratio put spread, buying 1,500 in-the-money puts at the January 2011 $34 strike for a premium of $2.00 each, and selling 3,000 puts at the lower January 2011 $32 strike at a premium of $1.05 apiece. The trader pockets a net credit of $0.10 per contract on the transaction, and may amass maximum potential profits of up to $2.10 per contract, including the net credit received, should GM’s shares decline 5.7% from the current price of $33.92 to settle at $32.00 at expiration. The transaction may be the work of an investor securing downside protection on a long position in the underlying shares, or an outright bearish player expecting the automaker’s shares to tumble in the next few months. The ratio of twice as many sold put options could result in losses for the trader responsible for the spread if shares plunge 11.85% to trade beneath the effective lower breakeven price of $29.90 ahead of January expiration. But, put traders were not the only ones navigating GM options today. Investors expecting shares in the name to rally in the next couple of months scooped up more than 2,200 calls at the January 2011 $35 strike for an average premium of $1.04 each. Bulls are poised to profit should shares jump 6.25% to surpass the average breakeven price of $36.04 by expiration day next year.
SNDK – SanDisk Corp. – Shares of the maker of data storage products are down 1.25% to stand at $44.66 as of 1:30 pm this afternoon, but one options trader populating January 2011 contract calls is positioning for shares to reverse course ahead of expiration day next year. The bullish strategist initiated a call spread, buying roughly 3,700 in-the-money calls at the January 2011 $43 strike for an average premium of $3.99 each, and selling about the same number of calls up at the January 2011 $47 strike at an average premium of $2.03 apiece. The average net cost of establishing the spread amounts to $1.96 per contract. Thus, the trader is prepared to make money should SanDisk’s shares rally above the average breakeven price of $44.96 by January expiration. Maximum potential profits of $2.04 per contract are available to the investor in the event that SNDK shares jump 5.2% over the current price of $44.66 to trade above $47.00 ahead of expiration day in the first month of 2011.
FO – Fortune Brands, Inc. – The holding company with well-known brands such as Maker’s Mark and Jim Beam shot up on our scanners early this morning after a sizeable put spread was purchased in the January 2011 contract. Shares in Fortune Brands commenced the session in the red, but pared earlier losses to rally 1.00% to $59.83 as of 12:15 pm. It looks like the investor responsible for the put activity initiated a delta neutral hedge, buying 3,450 puts at the January 2011 $55 strike for a premium of $1.71 per contract, and selling the same number of puts at the lower January 2011 $50 strike at a premium of $0.51 apiece, against the purchase of roughly 50,000 shares of the underlying stock for a price of $59.00 each on a delta of approximately 0.145. Fortune’s shares hit a new 52-week high of $60.27 last week, and the parameters of this transaction suggest the trader is cautiously optimistic going forward. The investor will benefit from continued upward movement in the price of the underlying, but is also protected in case shares falter ahead of expiration day in January. The net cost of purchasing the put spread amounts to $1.20 per contract, yielding an effective breakeven price of $53.80. The trader purchased a larger-sized put spread in order to achieve delta neutrality to cover the position in Fortune shares.
SVU – Supervalu, Inc. – Call options are flying off the shelves at Supervalu today with shares of the operator of grocery retailers rising 2.95% this afternoon to $9.06 as of 12:55 pm in New York. Investors expecting Supervalu’s shares to continue higher ahead of expiration day next month purchased more than 1,350 in-the-money calls at the December $9.0 strike for an average premium of $0.40 each. Call buyers at this strike make money if SVU’s shares rally another 3.75% to exceed the average breakeven price of $9.40 by expiration. Bullishness spread to the higher December $10 strike where more than 7,160 call options changed hands. Approximately 4,400 of the calls were purchased at an average premium of $0.20 a-pop. Investors holding these contracts are prepared to profit should shares in Supervalu surge 12.6% to trade above the average breakeven point at $10.20 by December expiration day. It looks like the majority of open interest in calls at these strike prices is the result of call buying behavior initiated by like-minded investors positioning for the price of the underlying stock to appreciate before expiration. SVU’s overall reading of options implied volatility jumped 28.8% in early afternoon-trade to 60.30%.
