Seeking Alpha
Profile| Send Message|
( followers)  

Affymax, Inc. (OTCPK:AFFY)Shares of the biopharmaceutical company plunged 68.7% to an intraday low of $7.20 today after data showed that non-dialysis patients taking Affymax’s anemia drug, Hematide, have a higher rate of heart attacks, chest pain, heart failure, arrhythmia, strokes and death than patients taking a similar drug made by Amgen Inc. The Hematide safety concerns inspired a downgrade of Affymax to ‘underperform’ from ‘outperform’ with a 12-month target share price of $7.00 by an analyst at RBC Capital this morning. Bearish options investors populating AFFY today initiated trades implying the price of the underlying stock will not recover in the next several months. Pessimistic players sold short roughly 2,800 calls at the July $10 strike to pocket an average premium of $0.37 apiece. Investors short the calls keep the full $0.37 premium received today as long as Affymax’s shares trade below $10.00 through July expiration. Call-selling spread to the October $10 strike where approximately 1,600 calls were shed for an average premium of $0.80 per contract. Investors keep the full $0.80 premium per contract if shares of the underlying stock fail to rally above $10.00 ahead of October expiration.

Revlon, Inc. (NYSE:REV)The manufacturer of an array of cosmetics, beauty tools, fragrances, skincare and other personal care products appeared on our ‘hot by options volume’ market scanner in the first half of the trading session after one options investor initiated a bullish transaction on the stock. Revlon’s shares are currently lower by 0.15% to $12.83 as of 12:27 pm (ET), but shares rallied as much as 2.80% at the start of the trading day to reach an intraday high of $13.21. One long-term bullish individual appears to have purchased a plain-vanilla debit call spread, buying 3,600 calls at the November $17.5 strike for a premium of $1.30 apiece, and selling the same number of calls at the higher November $25 strike for a premium of $0.25 each. The net cost of buying the spread amounts to $1.05 per contract. Thus, the optimistic investor is prepared to profit if Revlon’s shares surge more than 44.5% over the current price to trade above the effective breakeven point on the spread at $18.55 by expiration day. The trader stands ready to accumulate maximum potential profits of $6.45 per contract should the cosmetics maker’s shares jump 95% to trade at or above $25.00 by November expiration. Revlon’s shares have not traded above $25.00 since June 1, 2006.

Alcoa, Inc. (NYSE:AA) – – Shares of the aluminum manufacturer are up 8.10% to stand at $12.01 as of 12:15 pm (ET). The rally in the price of the underlying stock inspired bullish call buying across several expiries. Near-term optimists are positioning for continued upward momentum in Alcoa’s shares by purchasing at least 9,400 now in-the-money calls at the July $12 strike for an average premium of $0.41 apiece. Investors buying calls outright at the July $12 strike are prepared to profit if the aluminum maker’s shares gain another 3.33% to trade above the average breakeven price of $12.41 by July expiration day. Bulls also purchased approximately 6,600 calls at the higher July $13 strike for an average premium of $0.17 each. Alcoa’s shares must rally 9.65% from the current price of $12.01 before July $13 strike call buyers make money above the effective breakeven point at $13.17. Finally, the July $14 strike enticed options optimists to purchase roughly 1,000 calls for an average premium of $0.05 each. Call buying behavior spread to the October $14 strike where some 5,300 calls were picked up for an average premium of $0.39 per contract. Investors long the calls make money only if Alcoa’s shares surge 19.8% to trade above the average breakeven price of $14.39 ahead of October expiration.

Oracle Corp. (NYSE:ORCL)Plain-vanilla call buying activity observed today on software manufacturer, Oracle Corp., suggests some options investors are itching for a sharp rally in the price of the underlying shares by September expiration. Oracle’s shares increased 0.30% to trade at $23.27 as of 12:35 pm (ET). Long-term optimistic individuals picked up roughly 3,200 calls at the September $29 strike for an average premium of $0.04 per contract. Call buyers at this strike price make money only if Oracle’s shares rally 24.8% from the current price of $23.27 to trade above the average breakeven point to the upside at $29.04 by September expiration.

Source: Monday Options Brief: AFFY, REV, AA & ORCL