Seeking Alpha
Profile| Send Message|
( followers)  

AMR Corp. (AMR) – Optimism on airline operator and parent company of American Airlines, AMR Corp., is hard to dispute today after investors employed debit call spreads on the stock in the November contract. AMR’s shares rallied 3.5% during the first half of the trading session to $9.41. Bullish options players purchased 10,221 call options at the November $12 strike for an average premium of $1.04 apiece, and shed the same number of calls at the higher November $17.5 strike for $0.19 each. Net premium paid for the call spread amounts to $0.85 per contract. Long-term optimistic investors initiating the call spreads are prepared to amass maximum potential profits of $4.65 per contract. But, in order to walk away with the full amount of profit, AMR shares must surge 86% from the current price of $9.41 to surpass $17.50 ahead of November expiration. Call-spreaders make money on the transaction as long as shares increase at least 36.55% to breach the effective breakeven share price of $12.85.

UAL Corp. (UAUA) – The Chicago, IL-based operator of United Airlines attracted bullish options players during the trading session amid a 2.55% rally in its share price to $20.16. Earlier in the day UAUA’s shares traded up to an intraday high of $20.55, which is just four pennies less than the current 52-week high on the stock of $20.59. UAUA’s shares are up roughly 570% over their 52-week low of $3.07 attained back on July 10, 2009, but investors trading options on the stock today are apparently expecting shares to continue to appreciate. A couple of call spreads were initiated on UAL Corp., the first of which involved the purchase of 2,000 calls at the June $22.5 strike for a premium of $1.51 apiece, spread against the sale of the same number of calls at the higher June $30 strike for $0.19 each. The net cost of this transaction amounts to $1.32 per contract, and yields maximum potential profits of $6.18 per contract if UAUA’s shares rally another 363% over the current year’s high of $20.59 to reach $30.00 by June expiration. Similar optimism was observed in the September contract where a 2,000-lot September $25/$30 call spread was purchased for a net premium of $1.45 per contract. The investor responsible for this transaction banks maximum potential profits of $3.55 per contract if shares of the underlying stock exceed $30.00 by expiration day.

RTI International Metals, Inc. (RTI) – Shares of the producer and global supplier of titanium mill products jumped more than 7.65% today to attain a new 52-week high of $32.18. Perhaps RTI’s shares are higher on news released earlier this week that jet manufacturer, Boeing, is ramping up production and boosting demand for titanium. RTI International Metals is also a manufacturer of fabricated titanium and specialty metal components for international aerospace, defense, energy and industrial and consumer markets. The surge in the price of the underlying stock inspired bullish options trading activity during the current session. Investors purchased more than 2,100 call options at the April $35 strike for an average premium of $0.32 apiece in order to position for continued upward momentum in the price of RTI shares through expiration. Call-coveters profit if shares rally another 9.75% to exceed the breakeven point at $35.32 by expiration day next month. The spike in demand for options on the titanium maker boosted the overall reading of options implied volatility on the stock 7.9% to 49.53% as of 12:20 pm (ET).

Nexen, Inc. (NXY) – Bearish investors pawed at put options on Canada-based independent oil and gas company Nexen today suggesting shares may be set to sink ahead of May expiration. Shares are trading a scant 0.10% higher on the day to stand at $23.92 as of 12:25 pm (ET). Pessimistic options players picked up 5,630 put options at the May $22.5 strike for an average premium of $0.65 apiece. Put buyers make money if Nexen’s shares fall 8.65% from the current price to breach the breakeven point at $21.85 ahead of expiration day in May. We note that shares of the underlying stock traded down to $21.31 as recently as February 25, 2010.

Finish Line Inc. (FINL) – Brand-name athletic footwear and apparel retailer, Finish Line Inc., attracted bullish options investors this morning as shares of the underlying stock exploded 12.55% to the upside to reach a new 52-week high of $16.50. Shares of the Indianapolis-based company surged after Finish Line reported fourth-quarter sales of $374.5 million, which exceeded average analyst estimates of $346.2 million. Bullish options players purchased debit call spreads on the stock to position for continued upward movement in the price of the retailer’s shares through August expiration. It looks like traders picked up 4,000 in-the-money calls at the August $15 strike for an average premium of $2.39 apiece, and shed the same number of calls at the higher August $17.5 strike for an average premium of $0.95 each. Net premium paid for the spread amounts to $1.44 per contract. Thus, call-spreaders stand ready to accrue maximum potential profits of $1.06 per contract should Finish Line’s shares rally through $17.50 ahead of expiration day in August. Options implied volatility collapsed 26.2% to 38.87% in the first half of the trading session.

UnitedHealth Group, Inc. (UNH) – Investors populating the options field on UnitedHealth Group this morning are indicating volatility in the price of UNH shares is set to decline by enacting iron condors in the April contract. The health and well-being company’s shares are trading slightly higher by 0.20% in early trading to stand at $33.19. Options players initiated the iron condor strategy on the stock by effectively call credit spreads and put credit spreads. Approximately 6,000 calls at the April $34 strike were sold for an average premium of $0.70 each, and spread against the purchase of about 6,000 calls at the higher April $36 strike for $0.18 apiece. On the put side, investors sold 6,000 contracts at the April $32 strike for a premium of $0.64 each and purchased the same number of puts at the lower April $30 strike for an average premium of $0.24 apiece. Net premium enjoyed on the iron condors amounts to $0.92 per contract. Investors keep the full amount of premium as long as UnitedHealth’s share price trades within the range of $32.00 to $34.00 through April expiration day. The parameters of the iron condor strategy expose investors to maximum potential losses of $1.08 per contract should shares trade above $36.00 or dip below $30.00 ahead of expiration.

Arena Pharmaceuticals, Inc. (ARNA) – Bullish put selling dominated early morning options trading on the clinical-stage biopharmaceutical company, indicating investors believe Arena’s shares are not likely to slip beneath $3.00 in the next several months. Shares of the underlying stock commenced the session in the red, but rallied 0.60% to $3.38 as of 10:30 am (ET). Options players sold approximately 11,000 puts at the May $3.0 strike to take in an average premium of $0.12 per contract. Put selling continued at the July $3.0 strike where at least 10,300 puts were sold short for an average premium of $0.73 apiece. Investors engaging in such activity keep the premium received on the sale of the put contracts as long as Arena’s shares trade above $3.00 through expiration. Traders short the May contract puts are apparently willing to have shares of the underlying stock put to them at an effective price of $2.88 per share should the puts land in-the-money at expiration, while investors short the July contract puts are similarly happy to have shares put to them at $2.27 per share.

Source: Friday Options Brief: AMR, UAUA, RTI, NXY, FINL, UNH, ARNA