Ventas, Inc. (NYSE:VTR) – Shares of the REIT with a portfolio of seniors housing and healthcare properties in the U.S. and Canada rallied as much as 2.04% this afternoon to reach an intraday- and new 52-week high of $51.57. Ventas popped up on our ‘hot by options volume’ market scanner in the second half of the trading session after one cautiously optimistic investor bought a large amount of stock in combination with a delta neutral put spread in the August contract. The transaction shows guarded optimism by one investor ahead of the firm’s second-quarter earnings report scheduled for release ahead of the opening bell on Wednesday morning. The options strategist paid a premium of $1.05 per contract for an 8,500-lot August $40/$50 debit put spread with a .32 delta tied to the purchase of 272,000 Ventas shares at $51.37 each. The investor is hoping to see shares rally to new highs following earnings, but has shelled out extra premium in order to get long downside protection in case Ventas’ shares decline.
Baidu, Inc. (NASDAQ:BIDU) – The Chinese-language internet search provider’s shares jumped 3.6% to an intraday high of $80.87 today after the firm received an upgrade to ‘buy’ from ‘neutral’ with an increased target share price estimate of $92.00 from $69.00 at UBS. Shares were also lifted higher on news Baidu is in talks with mobile phone makers to discuss use of the firm’s search box on devices sold in China. The price of the underlying stock is currently up 2.05% on the day to arrive at $79.67 as of 3:00 pm ET. Options players itching for continued appreciation in the price of the underlying shares through the end of this month purchased weekly call options on the stock that are set to expire on July 30. Investors picked up 1,000 calls at the July $80 strike for an average premium of $1.48 each. Call buyers at this strike make money if Baidu’s shares rally another 2.3% to trade above the average breakeven price of $81.48 by expiration day. Optimistic individuals looking for BIDU’s shares to hit a new 52-week high before the week is through purchased some 2,100 call options at the higher July $85 strike for an average premium of $0.29 a-pop. Shares must increase at least 7.05% in order for July $85 strike call buyers to make money above the effective breakeven point at $85.29 by July 30 expiration day. Bullish sentiment on the Chinese-language ISP spread to the August contract where plain-vanilla call buying continued. Investors paid an average premium of $3.17 per contract to take ownership of some 5,300 calls at the August $80 strike. Meanwhile, bulls bought 2,400 calls at the higher August $85 strike for an average premium of $1.43 apiece. Finally, uber-bulls scooped up 1,300 call options at the August $90 strike for an average premium of $0.63 a-pop. Baidu’s shares must surge 13.75% in order for August $90 strike call buyers to start to accumulate profits above the average breakeven price of $90.63 by August expiration day.
Waters Corp. (NYSE:WAT) – Call options on the medical equipment maker are in high demand this afternoon ahead of the firm’s second-quarter earnings report scheduled for release ahead of the opening bell on Tuesday. Waters’ shares rallied more than 2.00% today to an intraday high of $65.91. Options investors positioning for a significant bullish move in the price of the underlying stock ahead of August expiration purchased approximately 8,900 call options at the August $70 strike for an average premium of $0.69 apiece. Investors long the calls stand ready to make money as long as Waters’ shares jump 7.25% over today’s high of $65.91 to trade above the average breakeven point to the upside at $70.69 by August expiration. The impending earnings announcement as well as increased demand for call options on the stock lifted Waters Corp.’s overall reading of options implied volatility 2.7% to 30.65% by 3:15 pm (NYSE:ET).
D.R. Horton, Inc. (NYSE:DHI) – Investors are constructing bullish positions on D.R. Horton this afternoon with shares of the homebuilding company trading higher by more than 3.4% to stand at $11.22 just after 1:15 pm ET. Perhaps optimism on DHI was bolstered by the 23.6% jump in sales of new single-family homes in June reported by the Commerce Department this morning. The homebuilding firm is slated to report second-quarter earnings ahead of the opening bell on August 3. Options investors expecting shares to rally higher ahead of September expiration purchased approximately 1,000 calls at the September $13 strike for an average premium of $0.17 each. Call buyers at this strike make money as long as the price of the underlying stock surges 17.35% over the current price of $11.22 to surpass the average breakeven point to the upside at $13.17 by expiration day in September. Other optimists sold some 10,600 puts at the September $11 strike to take in an average premium of $0.62 apiece. Put sellers keep the full premium received on the transaction as long as DHI’s shares exceed $11.00 through expiration day. Investors short the puts may have shares of the underlying stock put to them at an effective price of $10.38 each in the event the put options land in-the-money at expiration. Finally, it looks like one trader was properly positioned to benefit from the current rally. It appears the investor originally sold roughly 2,500 puts at the August $9.0 strike for an average premium of $0.34 a-pop back on July 7, 2010. Today it seems the trader purchased-to-close the short 2,500-lot stance at a premium of just $0.09 each. In this scenario, the investor responsible for the trade pockets net profits of $0.25 per contract by closing out the short position.
US Airways Group, Inc. (LCC) – Large chunks of call options changed hands on US Airways this morning with shares of the underlying stock rallying 3.20% to $10.68 by 12:10 pm ET. It looks like the majority of the call action took place in the August contract and is the work of one investor rolling a long call stance up to a higher strike price. The trader likely purchased appoximately 18,000 calls at the August $10 strike for an average premium of $0.41 apiece back on July 6th and 7th when LCC shares traded within a range of $8.02 to $9.35 each. The subsequent rally in US Airways’ shares inspired the investor to sell 18,000 now in-the-money calls at the August $10 strike today at a premium of $1.06 per contract. Average net profits on the sale of the calls amounts to $0.65 per contract. The investor maintained a bullish stance on the stock and augmented the size of the long call position by purchasing 34,000 lots at the higher August $12 strike for an average premium of $0.24 each. The investor starts to make money on the new long call position if shares of the airline operator rally another 14.6% over the current price, shatter the existing 52-week high on the stock of $10.87, and exceed the effective breakeven point on the calls at $12.24 by expiration day next month.
Office Depot, Inc. (NASDAQ:ODP) – A number of options players are placing bullish bets on the office supplies retailer today ahead of the firm’s second-quarter earnings report scheduled for release ahead of the opening bell on Tuesday morning. ODP shares are currently up 5.00% to stand at $4.61 as of 11:40 am ET. Investors expecting shares to continue to rally purchased at least 4,000 calls at the September $5.0 strike for an average premium of $0.25 apiece. Call buyers are poised to profit should Office Depot’s shares increase another 13.9% over the current price of $4.61 to surpass the average breakeven point to the upside at $5.25 by expiration day in September. In contrast the plain-vanilla call buying action observed in the September contract, investors populating the August contract appear to be selling strangles. It looks like traders shed roughly 2,500 calls at the August $5.0 strike for an average premium of $0.14 each, and sold about the same number of puts at the lower August $4.0 strike for an average premium of $0.11 apiece. Strangle-sellers are positioning for the price of the underlying stock to remain range-bound through expiration day next month. If ODP shares trade within the specified range of $4.00 to $5.00 through August expiration, investors walk away with maximum potential profits of $0.25 per contract. However, the short stance taken in both call and put options expose investors to potentially devastating losses should shares rally above the upper breakeven price of $5.25, or should shares slip beneath the lower breakeven price of $3.75, ahead of expiration day. The overall reading of options implied volatility is up 6.9% to 66.08% ahead of Tuesday’s earnings report.
Great Atlantic & Pacific Tea Co., Inc. (GAP) – Shares of the operator of supermarkets in the U.S., which were brutalized last week after the firm reported its CEO quit amid posting a wider-than-expected first-quarter loss, rebounded 5.35% today to trade at $2.76 by 12:25 pm ET. The move higher in GAP’s shares inspired bullish trading strategists to sell put options in the August contract. It looks like investors expecting GAP’s shares to exceed $2.50 through expiration day next month sold approximately 5,600 puts at the August $2.5 strike for an average premium of $0.10 per contract. Put sellers keep the full $0.10 premium received on the transaction as long as shares of the underlying stock trade above $2.50 through August expiration. Investors short the puts are apparently happy to have GAP shares put to them at an effective price of $2.40 each should the put options land in-the-money by expiration day in August. Options implied volatility on GAP plunged 37.1% lower during the session to 65.49% as of 12:40 pm ET.
Isilon Systems, Inc. (ISLN) – The computer services firm popped up on our ‘hot by options volume’ market scanner in the first half of the trading session due to bearish options action in the December contract. Isilon Systems’ shares are currently down 0.80% to arrive at $17.50 as of 11:50 am ET. It looks like one investor anticipating continued erosion in the price of the underlying stock purchased a plain-vanilla debit put spread, buying 2,000 puts at the December $15 strike for a premium of $1.55 each, and selling the same number of puts at the lower December $7.5 strike for $0.10 a-pop. The net cost of the bearish spread amounts to $1.45 per contract. Thus, the options player is prepared to profit should ISLN shares plummet 22.5% from the current price of $17.50 to breach the effective breakeven point on the spread at $13.55 by expiration in December. The investor stands ready to amass maximum potential profits of $6.05 per contract as long as Isilon’s shares plunge 57.1% lower to trade below $7.50 by expiration day.