Today’s tickers: JPM, GG, CVA & RSH
JPM – JPMorgan Chase & Co. – Bullish sentiment on JPMorgan is alive, well and flourishing by the looks of transactions taking place in April contract call and put options this afternoon. Shares in the name are down 1.7% at $44.69 as of 1:00pm in New York, but some strategists are positioning for the stock to rally during the next few months. JPM-bulls are taking advantage of the dip in the price of the underlying, and seem little concerned the latest buzz regarding a lawsuit filed in December of last year, alleging the company knew of, but failed to report, fraudulent activity perpetrated by Bernard Madoff. A three-legged transaction involving the sale of 4,500 April $52 strike puts and the sale of the same number of April $49 strike calls, reduced the cost of buying 4,500 calls at the April $45 strike to just $0.27 per contract. The investor responsible for the transaction starts to make money if shares in the financial services firm rise 1.3% to surpass the effective breakeven price of $45.27 ahead of April expiration. Maximum potential profits of $3.73 per contract are available to the trader in the event that JPM’s shares surge 9.6% in the next three months to trade above $49.00 by expiration day. Meanwhile, it looks like other bulls are buying the April $46/$49 call spread, around 9,000 times, for an average premium of $1.11 per contract. Debit call-spreaders stand prepared to profit should shares increase 5.4% to trade above the average breakeven share price of $47.11 before the calls expire in April. Investors could walk away with maximum potential profits of $1.89 per contract if the price of the underlying stock jumps 9.6% to exceed $49.00 by April expiration day.
GG – Goldcorp, Inc. – Investors placed medium-term bullish bets on the gold producer today in order to position for significant appreciation in the price of the underlying stock over the next few months. Shares in the gold mining company pared gains realized earlier in the session, and currently trade 0.35% lower on the day at $41.70. Gold-bulls picked up more than 2,700 fresh call options at the March $44 strike for an average premium of $1.02 each. More than 3,500 calls changed hands at that strike on previously existing open interest of 970 contracts. Call buyers start to make money if Goldcorp’s shares rally 8.0% to surpass the average breakeven point to the upside at $45.02 by expiration. Options traders initiated bullish stances in the April contract, as well. Investors picked up around 5,000 calls at the April $42 strike for an average premium of $2.17 each, and sold the same number of calls up at the March $47.5 strike at an average premium of $0.58 a-pop. Net premium paid to initiate the transaction amounts to $1.59 per contract. Thus, call-spreaders are poised to profit should shares in Goldcorp trade above the average breakeven price of $43.59. Maximum potential profits of $3.91 per contract are available to GG-bulls if the price of the underlying stock soars 13.9% over the current price of $41.70 to exceed $47.50 by April expiration.
CVA – Covanta Holding Corp. – Call options on the operator of various waste and energy services operations are active this morning with less than one week remaining before the firm reveals earnings for the fourth-quarter after the closing bell on February 9, 2011. Shares in Covanta Holding Corp. are currently flat on the day at $17.16 as of 12:05pm in New York. More than 4,900 calls changed hands at the February $17.5 strike on paltry previously existing open interest of just 144 contracts. It looks like around 4,100 of the calls were purchased for a premium of $0.20 apiece. Call buyers profit if Covanta’s shares rally 3.1% over the current price of $17.16 to exceed the effective breakeven price of $17.70 ahead of February expiration. Options implied volatility on CVA increased with the rise in demand for calls, and currently stands 12.4% higher on the session at 23.57% in early afternoon trade.
RSH – RadioShack Corp. – Options traders are employing diverse bullish strategies on the consumer electronics retailer today with shares in RadioShack rising as much as 3.9% in the first half of the trading session to an intraday high of $15.78. Shares touched down at a new 52-week low of $14.96 on Monday. Reports of renewed rumors and speculation that Carl Icahn may file a stake in the company, as well as the firm’s upcoming fourth-quarter earnings release on February 22, 2011, have perhaps spurred option traders to action this morning. It looks like plain-vanilla call buyers focused on the front month, while a call-spreader targeted the March contract. Investors positioning for RadioShack’s shares to continue to rebound picked up more than 3,500 calls at the February $16 strike for an average premium of $0.25 apiece. Call buyers start to make money in the event that RSH shares rally another 3.0% to surpass the average breakeven price of $16.25 by expiration day. Another options strategist partially reduced the premium required to take a bullish stance on the stock by initiating a debit call spread. The investor purchased 1,000 calls at the March $17 strike for a premium of $0.34 each, and sold the same number of calls up at the March $19 strike at a premium of $0.06 apiece. The net cost of the spread amounts to $0.28 per contract, and positions the trader to profit should shares surge 9.5% to trade above the average breakeven point at $17.28 by March expiration. Maximum potential profits of $1.72 per contract are available to the call spreader if shares jump 20.4% to exceed $19.00 before the options expire next month. The rise in demand for options on the stock and unconfirmed rumors helped RadioShack’s overall reading of options implied volatility increase 7.9% to 39.22% by 11:55am in New York.
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Andrew Wilkinson |
Caitlin Duffy |
