Tuesday Options Update: CF, PCLN, XLF, CX & CAR

CF Industries Holdings, Inc. (CF) – Bearish option plays appeared on the manufacturer of nitrogen and phosphate fertilizer products today after the firm rejected rival Agrium Inc.’s increased takeover offer of $4.52 billion. Shares of CF are currently trading 4% lower to $77.20. Investors purchased put options at the now in-the-money December 80 strike for an average premium of 6.70 apiece. Perhaps put-buyers are protecting long stock positions. Otherwise, they are hoping to accrue profits if shares of CF decline through the effective breakeven price of $73.30. Another trader unraveled a previously established bullish play in the January 2010 contract. The investor originally placed an extremely bullish 8,500-lot call spread at the January 90/100 strikes. However, the trader abandoned bullish sentiment today by closing out the spread. Option implied volatility on CF jumped 7.5% over Monday’s closing value of 52.9% to reach an intraday high of 55.9%.

Priceline.com, Inc. (PCLN) – Third-quarter sales and profit at online travel agency, Priceline.com, exceeded analyst expectations and sent shares up 19% today to a new 52-week high of $206.78. PCLN posted earnings of $3.45 per share whereas previous forecasts averaged around $2.92 per share. Priceline raked in 30% higher sales of $730.7 million for the quarter. Investors initiated bullish stances on the stock by purchasing 3,200 calls at the November 210 strike for an average premium of 2.72 apiece. Traders will profit if shares of PCLN continue to rally another 4% and surpass the breakeven price of $212.72 by expiration this month. Nearly 1,000 call options were purchased at the November 230 strike for approximately 64 cents premium each. Investors long the November 230 strike calls could already reel in short term profits by selling the contracts, which now tote an asking price of 1.15 per contract. Option implied volatility imploded following earnings, falling 24%, to an intraday low of 42%.

Financial Select Sector SPDR (XLF) – Shares of the financial exchange-traded fund slipped nearly 1% lower during the session to $14.70. One investor appears to have purchased 40,000 married put options on the fund today by simultaneously taking a long position in both shares of the underlying fund and put contracts. The June 2010 12 strike had 40,000 puts purchased for an average premium of 75 cents apiece. The put options yield downside protection in case shares of the XLF decline beneath the breakeven point at $11.25 by expiration in June of 2010. However, the investor responsible for the transaction is likely long-term bullish on the financial sector, and hopes shares will gain far more than the cost of the added insurance premium over the next seven months.

Cemex S.A.B. de C.V. (CX) – Ready-mix concrete producer, Cemex, experienced a 2% decline in shares today to $11.54. Despite the dip in shares, it looks like one investor is taking profits on an position established about a week ago, and is rolling the bullish stance to a higher strike price in the December contract. It appears the trader originally purchase 5,927 calls at the December 11 strike for about 70 cents premium apiece on November 2, 2009. The investor sold the calls today for 1.25 apiece, earning net profits of 55 cents per contract. Next, the cement-bull bought 5,927 calls at the higher December 12 strike by paying out 80 cents premium apiece. Additional profits on the new long-call position will accumulate if shares of CX rally 11% to $12.80 by expiration.

Avis Budget Group, Inc. (CAR) – The 1% decline in shares of the rental car company today to $10.36 may have prompted one investor to take profits by selling in-the-money call options. The trader likely purchased approximately 5,300 calls for an average premium of 50 cents at the now in-the-money November 10 strike, back on November 2, 2009. Today the investor sold 5,300 calls at the same strike for 1.05 apiece. Perhaps the trader is taking what profits he can in case shares of CAR continue to decline ahead of expiration day in less than two weeks. Net profits on the closing sale amount to 55 cents per contract. Plain-vanilla put buying in the December contract adds to bearish sentiment on Avis today. It looks like 1,000 put options were picked up at the December 10 strike for an average premium of 1.00 apiece. Additional pessimism on CAR took the form of a stop-loss strategy. An investor possibly sold shares short on the underlying stock, spread against the purchase of 7,900 calls at the out-of-the-money December 12.5 strike, for 65 cents each. This individual is likely similarly throwing in the towel on Avis. The long call position acts to limit losses in case shares actually rally higher ahead of expiration in December.