Friday Options Update: XLF, MOS, RIMM, F, VVUS, WEN, ALTR

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 |  Includes: ALTR, BBRY, F, MOS, VVUS, WEN, XLF
by: Interactive Brokers

Financial Select Sector SPDR (NYSEARCA:XLF) – Near-term bullish bets that shares of the XLF, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the Financial Select Sector of the S&P 500 Index, are set to rally ahead of July expiration jumped during afternoon trading. Shares of the ETF increased nearly 1.5% during the session to stand at $14.52 by 3:15 pm ET. Options investors itching for a rally in the price of the underlying shares purchased at least 115,000 calls outright at the July $15 strike for an average premium of $0.08 per contract. Call buyers are prepared to profit should shares of the XLF gain 3.85% to trade above the average breakeven price of $15.08 by expiration next Friday.

The Mosaic Co. (NYSE:MOS) – Shares of the producer and marketer of concentrated phosphate and potash crop nutrients are up 3.3% to $46.20 with less than 45 minutes remaining ahead of the closing bell. Mosaic’s shares earlier rallied as much as 3.95% to touch an intraday high of $46.49. One bullish strategist purchased a debit call spread on the stock in order to position for Mosaic’s shares to increase substantially by expiration day in September. The trader picked up 2,800 calls at the September $50 strike for an average premium of $1.99 apiece, and sold the same number of calls at the higher September $65 strike for an average premium of $0.07 each. Net premium paid for the spread amounts to $1.92 per contract. The investor responsible for the transaction makes money as long as the potash producer’s shares surge 12.4% in the next several months to exceed the average breakeven point on the spread at $51.92 by expiration. Maximum available profits of $13.08 per contract pad the investor’s wallet if MOS shares jump 39.8% to trade above $65.00 by expiration day in September. Mosaic’s shares last traded above $65.00 back on January 11, 2010, when the stock reached an intraday and new 52-week high of $68.28.

Research in Motion Ltd. (RIMM) – News the Blackberry maker plans to start an applications store as well as consumer Internet services in China sent RIMM’s shares up 8.47% in afternoon trading to an intraday high of $53.65 by 3:25 pm ET. Optimism on the firm’s expansion in the Chinese market was reflected in options trading patterns today as investors scooped up in- and out-of-the-money call options on the stock. Traders picked up at least 6,900 now in-the-money calls at the July $52.5 strike for an average premium of $1.11 apiece. Buying interest spread to the higher July $55 strike where some 12,800 calls were coveted by investors paying an average premium of $0.39 per contract. Investors long the July $55 strike calls make money if RIMM’s shares rally 3.25% over today’s high of $53.65 to trade above the average breakeven point to the upside at $55.39 by July expiration day. Other bulls bought 2,500 calls at the higher July $57.5 strike for an average premium of $0.14 a-pop, and purchased 1,500 calls at the July $60 strike for an average premium of $0.06 each. Investors targeting the July $75 strike shelled out one penny per contract to take ownership of approximately 2,100 call options at that strike. More than 138,000 option contracts changed hands on the smartphone maker by 3:35 pm (NYSE:ET), with investors trading approximately 1.45 calls on the stock for each single put option in action during the session. The overall reading of options implied volatility on Research in Motion Ltd. declined 7.1% to stand at 38.47% just before the final bell.

Ford Motor Co. (NYSE:F) – A massive bullish transaction employing 300,000 call options launched the automaker to the top of our ‘most active by options volume’ market scanner before 11:00 am ET this morning. Ford’s shares are currently up 1.80% to stand at $10.80 as of 12:05 pm ET. The options strategist responsible for the enormous three-legged spread known as a call tree appears to be positioning for Ford’s shares to rally significantly ahead of expiration day in September. The investor purchased 150,000 calls at the September $12 strike for a premium of $0.41 apiece, sold 75,000 calls at the September $14 strike at a premium of $0.09 each, and sold 75,000 calls at the higher September $15 strike for a premium of $0.05 a-pop. Net premium paid to establish the transaction amounts to $0.27 per contract, which brings the total price tag on the trade up to $4.05 million. The bullish investor starts to make money as long as Ford’s shares rally 13.6% over the current price of $10.80 to surpass the effective breakeven price to the upside at $12.27 by expiration day. The trader is poised to amass maximum potential profits of $2.23 per contract or total gains of $33.45 million if Ford’s shares trade at any price above $15.00 by expiration day in September. The sale of 75,000 calls at both the September $14 and $15 strikes implies the trader makes money on a 1-to-1 basis if shares rally above $12.00 and continue up to $14.00, but if shares rally above $14.00, profits amass on a position that is half the size of the original due to the short stance taken at the September $14 strike. Essentially the call tree was purchased by an investor expecting Ford’s shares to heat up in the next couple of months. If the stock fails to rally above $12.00 by expiration, however, the investor will lose the full $0.27 premium per contract paid to purchase the enormous trade.

Vivus, Inc. (NASDAQ:VVUS) – A three-legged options combination play on biopharmaceutical company, Vivus, Inc., appears to be the work of an investor building up downside protection on the stock in case the firm’s obesity drug, Qnexa, fails to garner support from the advisory committee to the Food & Drug Administration during their meeting scheduled for July 15. Vivus’ shares have had a terrific run up this week having rallied 27.66% from an intraday low of $9.47 on Tuesday up to today’s high of $12.09. VVUS shares are currently up 1.11% on the day to arrive at $11.82 just before 12:30 pm ET. One savvy options investor opted to sell out-of-the-money call options in the July contract in order to partially finance the purchase of a debit put spread. The transaction is a smart trade particularly if the advisory committee does not advise the FDA to approve Qnexa because Vivus’ shares will likely plummet on such news. The investor purchase 2,500 puts at the July $9.0 strike for a premium of $2.05 each, sold 2,500 puts at the lower July $7.0 strike for a premium of $1.10 apiece, and sold 2,500 calls at the July $20 strike for a premium of $0.35 a-pop. Net premium paid to enact the transaction is reduced to just $0.60 per contract. It seems likely the trader is long shares of the underlying stock. If this is the case, the investor is protected in case shares plunge 28.9% from the current price to breach the average breakeven point on the puts at $8.40 by expiration day. July contract options expire the day after the advisory committee is set to assemble. Additionally, the sale of the calls not only reduces the price paid to purchase downside protection, but also yields an effective exit strategy for the trader should shares of the underlying stock surge 69.2% to exceed $20.00 by July expiration. Vivus’ shares are likely to rally hard and fast if Qnexa scores well with the advisory committee next week. Options traders exchanged more than 49,000 contracts on Vivus, Inc. by 12:40 pm (ET). Vivus was rated new ‘outperform’ with a 12-month target price of $20.00 at Wedbush yesterday.

Wendy’s/Arby’s Group, Inc. (NASDAQ:WEN) – The owner and franchisor of Wendy’s and Arby’s restaurants popped up on our ‘hot by options volume’ market scanner due to bullish activity in the November contract. WEN’s shares climbed more than 5.3% during the first half of the day to trade at $4.16. Options traders hungry for continued bullish movement in the price of the underlying stock purchased 2,000 calls at the November $5.0 strike for an average premium of $0.30 per contract. Investors long the calls are positioned to profit should WEN’s shares surge 27.4% in the next four months to surpass the average breakeven price of $5.30 by November expiration day.

Altera Corp. (NASDAQ:ALTR) – Shares of the global semiconductor company rallied 2.00% to $27.39 in the first half of the trading session inspiring investor demand for call options on the stock. Bullish players expecting Altera’s shares to continue to appreciate and attain a new 52-week high by August expiration scooped up roughly 7,500 calls at the August $28 strike for an average premium of $0.85 per contract. Call buyers make money if shares of the underlying stock surge 5.33% over the current price to trade above the average breakeven point at $28.85 by expiration day next month. The current 52-week high on Altera Corp. is $27.48 attained back on April 21, 2010.