Tuesday Options Update: NTRI, GFI, AUY, AA, & WYE

NutriSystems, Inc. (NTRI) – Shares of the provider of weight management products and services are soaring 21% higher today to $18.26, after news reports on Monday revealed its 14-day Starter Program will be offered through 3,200 Wal-Mart stores. NutriSystems opened at a new 52-week high of $18.50 this morning, a 25 cent improvement over the old high of $18.25 attained back on September 22, 2009. Option traders hoping to catch the wave of bullish momentum on NTRI demanded call options in the November contract. Increased call activity and greater investor uncertainty over the future price of NutriSystems sent implied volatility on the stock up 14% to an intraday high of 68%. Approximately 1,500 calls were picked up at the November 20 strike for an average premium of 88 cents apiece. Investors holding the calls are hoping shares of NTRI rally another 14% from the current price to the breakeven point at $20.88 by expiration next month. Shares have not traded higher than the breakeven price since May 19, 2008, when the stock was at $21.08.

Gold Fields Ltd. ADR (GFI) – The rise to a record spot price of gold at above $1,035 per ounce today has call options in several gold mining companies in demand. Today’s push higher comes on account of a London-based newspaper article that predicts the dollar’s role in crude oil pricing will have vanished by 2018. The story is prompting short-selling of the already uncomfortable dollar and creating a vacuum in commodity prices adding upwards momentum to an already jittery gold market, concerned that the role of the dollar is set to diminish. In turn that promotes the value of hard assets. Gold Fields shares are trading at $14.88 and higher by 6.7% today. Meanwhile options on the company are trading at more than six-times the average turnover and a call-to-put ration of 24 clearly indicates that bullish plays are the order of the day. The most commonly populated target today is at the January 17.5 strike where so far more than 23,000 calls have changed hands at premiums valued of 1.00. While Gold Fields is today trading at its best price since April 2008, the 17.5 strike price was last reached in January 2008. We also see some selling of higher strike call options possibly used to help fund bullish purchases at lower strikes.

Yamana Gold, Inc. (AUY) – The gold producer’s estimates for total production of gold equivalent ounces for the third-quarter came in at record 314,200, boosting shares sharply higher by 9.5% to $11.39 today. One bullish investor reeled in profits on an existing position, and subsequently reestablished an optimistic stance on Yamana using call options. It appears the trader originally purchased 5,000 calls for 60 cents apiece at the October 10 strike price on September 2, 2009, when shares of AUY were trading at $10.19. Today he sold the calls for 1.17 each and pocketed profits of approximately 57 cents for a total of $285,000. Next, the investor doubled the number of call options and initiated a fresh bullish stance in the November contract. It appears he purchased 10,000 calls at the November 12 strike for about 60 cents premium apiece. Additional profits are available to the trader if shares of AUY climb through the breakeven price of $12.60 by expiration.

Alcoa, Inc. (AA) – Option traders heavily favored call options on the U.S. producer of aluminum, ahead of the firm’s third-quarter earnings results scheduled for release on Wednesday. Shares continued to add to yesterday’s 5% rally by climbing about 4% during today’s session to $13.95. According to a poll conducted by Thomson Reuters, analysts expect third-quarter profits to come in at a loss of 11 cents per share on revenue of $4.5 billion. Investors, who are perhaps expecting earnings to beat estimates, purchased more than 6,700 calls at the November 15 strike for an average premium of 78 cents per contract. Traders with a less optimistic view targeted the same strike to receive 78 cents premium on the short sale of 7,000 call options. Short-sellers retain the full 78 cents if shares of Alcoa fail to rally through $15.00 by expiration day. Conversely, investors long the call options are hoping shares jump at least 13% to breach the breakeven price of $15.78. Implied volatility rose 8% during the week to the current high of 65% as investors eagerly await tomorrow’s earnings report.

Wyeth (WYE) – The New Jersey-based pharmaceuticals company jumped to the top of our ‘most active by options volume’ market scanner today after one investor rolled a massive chunk of calls forward to the January 2010 contract. Shares of WYE are currently trading 1.25% higher to stand at $48.86. The option contracts traded to the middle of the market, but it seems likely that the investor sold 50,000 calls at the in-the-money October 47.5 strike for a premium of 1.70 apiece, and next purchased the same number of calls at the January 47.5 strike for 2.25 each. It is unclear how much the investor paid to initially purchase 50,000 calls.