Weatherford International Ltd. (WFT) – Shares of the provider of equipment and services to the oil and natural gas industries slipped 3.5% to $19.07, and prompted many option traders to abandon bullish positions. Investors threw in the towel on long call positions, selling 13,850 calls at the January $21 strike, for a paltry premium of $0.05 per contract. Call-sellers are taking in the available pittance on the contracts today before the out-of-the-money lots expire worthless on Friday.
PowerShares DB US Dollar Bullish Fund (UUP) – Dollar-bulls established call spreads on the UUP today, which is the Deutsche Bank Long US Dollar Futures Index, designed to replicate the performance of the greenback against a basket of currencies of its major trading partners. Shares of the fund slipped 0.25% lower during the session to $22.67. Call-spreaders purchased 20,000 calls at the June $23 strike for an average premium of $0.60 apiece, and sold 20,000 calls at the higher June $26 strike for $0.08 each. Investors paid an average net cost of $0.52 per contract for the debit spreads. Option traders are now positioned to accrue profits if the price per UUP share rallies 3.75% to breach the breakeven price of $23.52 by expiration in June. Maximum potential profits of $2.48 per contract are available to the investors if the index comes roaring back up to $26.00 per share. The UUP last settled above the strike price last Thursday and has only closed above $23 per share on 10 occasions since the start of December.
JPMorgan Chase & Co. (JPM) – Contrarian option traders made bullish plays on JPMorgan today despite the more than 2.5% decline in the value of its shares to $43.37. Optimistic investors sold nearly 20,000 put options at the February $42 strike to take in an average premium of $1.01 per contract. Put-sellers retain the full premium received if JPM’s shares trade above $42.00 for the remainder of the life of the put contracts sold. Additional bullishness appeared at the higher February $43 strike where 1,400 puts were shed for a premium of $1.43 apiece. Investors selling the higher-strike puts are apparently happy to have shares of the underlying stock put to them at an effective price of $41.57 each in the event that the puts land in-the-money by expiration day. Option implied volatility on the stock rose 6.80% to an intraday high of 32.80%.
SPDR Gold Trust ETF (GLD) – A massive bearish butterfly spread on the gold ETF caught our eye today amidst a 0.50% decline in the value of its shares to $112.38. One medium-term pessimist, who is likely long shares of the underlying stock, established large-volume protective stance in the September contract. The investor purchased 20,000 puts at the September $90 strike for $1.50 apiece [wing 1], and bought 20,000 puts at the lower September $60 strike for an average premium of $0.19 each [wing 2]. The central September $75 strike housed the body of the butterfly comprised of 40,000 sold put options for a premium of $0.35 apiece. The net cost of the bearish play amounts to $0.99 per contract. Downside protection kicks in if shares of the GLD plummet 20.80% from the current price to the upper breakeven point at $89.01. The investor’s underlying position is protected in case the fund’s share price declines through the 52-week low on the fund of $78.87, down to a price of $75.00 each.