Monday Options Update: NDAQ, ANDS, F & EEM

Includes: ANDS, EEM, F, NDAQ
by: Interactive Brokers

The Nasdaq OMX Group (NASDAQ:NDAQ) – Options on shares of the Nasdaq exchange stood out today as investors provoked some thoughts on where its share price might move following today’s announcement that the company was reorganizing some debt. Shares were just a little lower at $20.14 while it appears that some investors seem prepared to bet on a continuation of the rising trend. Its shares have shifted sideways during the past two weeks having rebounded from a November low at $18.57. Using options expiring this weekend, some 6,500 contracts were earlier traded at the $21 strike for a dime. That implies that these investors are looking for a decent pop during this week, or at least enough to boost the option’s value. These call options carry a 20% delta implying a one-in-five chance of rallying by 4.3% before Friday’s close. Elsewhere an investor appears to have sold about 2,300 put options for $1.45 at the same $21 strike but this time expiring in March. The seller would have to buy shares at the fixed strike price within the lifetime of the contract in the event shares in Nasdaq don’t shift higher. The premium of $1.45 means the put writer is effectively paying $19.55 to buy its shares. In September the share price topped out at just under $23.00.

Anadys Pharmaceuticals, Inc. (NASDAQ:ANDS) – One investor initiated a bull call spread on the clinical-stage biopharmaceutical company today as shares of the firm rallied nearly 6% to $2.36. The optimistic trader purchased 4,000 calls at the March $2.50 strike for a premium of $0.40 apiece, spread against the sale of the same number of calls at the higher March $5 strike for $0.05 each. The net cost of the bullish play amounts to $0.35 per contract and positions the investor to accrue profits above the breakeven price of $2.85. The trader pockets maximum available profits of $2.15 per contract only if ANDS’s shares increase 112% over the current price to $5.00 within the next couple of months to expiration.

Ford Motor Company (NYSE:F) – As Ford sweeps up the awards at the Detroit Motor Show investors have swept its shares to above $12 for the first time since March 2005. The acceleration in the share price comes at a time when the Chinese market officially overtook the U.S. market as the world’s largest, thanks to successful domestic stimulus at a time when American sales slumped. Still, options trading patterns reflect the risks of getting long the stock as American equity prices struggle to grind higher. Today’s investor interest using options appears to be skewed to the put side. In the February contract volume of 10,000 contracts traded at the $11 strike at a price of 32 cents while more than twice that volume went through at the $12 strike for 70 cents. In the June contract exactly 1,000 contracts were bought for an 8 cents premium at the lowly $5 strike.

iShares MSCI Emerging Markets Index ETF (NYSEARCA:EEM) – The wings of a massive bearish butterfly spread were unfurled in the March contract on the emerging markets fund today, suggesting shares of the EEM may suffer declines in the coming months. Shares are off 0.25% today to stand at $43.09. The investor responsible for the spread purchased 50,000 puts at the March $30 strike for $0.09 apiece [wing 1] and purchased 50,000 puts at the higher March $40 strike for $1.07 each [wing 2]. The central March $35 strike, representing the body of the butterfly, had 100,000 puts sold for $0.32 per contract. The investor paid a net $0.52 per contract to establish the bearish spread. Downside protection, if the trader holds a long position in the underlying stock, extends all the way down to $35.00. Alternatively, in the case that the spread is an outright bearish bet on the fund aimed at accruing profits to the downside, maximum gains of $4.48 per contract amass given declines of 18.5% from the current price to $35.00 by expiration.