Bank of America Corp. (BAC) – A sizeable ratio put spread initiated on Bank of America in late afternoon trading indicates one strategist is bracing for the price of the underlying shares to slip lower ahead of November expiration. The put player may be establishing the spread ahead of the financial services firm’s third-quarter earnings report ahead of the opening bell on October 19, 2010. BAC’s shares are currently down 0.15% to arrive at $13.16 with just under 45 minute remaining in the trading session. The trader picked up 20,000 puts at the November $13 strike for a premium of $0.51 each, and sold 40,000 puts at the lower November $11 strike at a premium of $0.08 apiece. Net premium paid for the transaction amounts to $0.35 per contract. The trader profits if shares in Bank of America decline another 3.9% to breach the effective breakeven price of $12.65 by November expiration. Maximum potential profits of $1.65 per contract are available to the ratio-spreader should shares fall 16.4% from the current price of $13.16 to settle at $11.00 at expiration day next month.
Wynn Resorts, Ltd. (WYNN) – Shares of the casino operator rallied as much as 9.5% this afternoon to reach a two-year high of $102.75 on strong market expectations for October sales at Macau-based casinos during China’s Golden Week holiday. Wynn Macau is Hong Kong’s second-largest listed casino firm by market value and earlier rallied to its highest level since listing in October 2009 in Hong Kong trading on bullish speculation. In U.S. trading, bullish options traders are picking up near-term calls in order to position for continued upward momentum in the price of WYNN’s shares through expiration on Friday. Traders purchased some 5,200 now in-the-money calls at the October $100 strike for an average premium of $1.56 each. In-the-money call buyers are poised to profit should Wynn Resorts’ shares trade above the average breakeven price of $101.56 through expiration day. Bullish sentiment spread to the higher October $105 strike where 2,700 calls were scooped up at an average premium of $0.55 apiece. Investors holding these contracts profit if the casino operator’s shares rise 2.725% over today’s high of $102.75 to exceed the average breakeven price of $105.55. Finally, uber-bulls bought 2,400 calls at the October $110 strike at an average premium of $0.24 a-pop and face an average breakeven price of $110.24. The overall reading of options implied volatility on Wynn Resorts, Ltd. is up 9.3% to arrive at 46.77% ahead of the final bell.
Supervalu, Inc. (SVU) – The operator of U.S. grocery retailers attracted bullish investors during the first half of the trading session with shares rising as much as 3.8% to an intraday high of $11.92. Investors expecting shares in Supervalu to continue higher ahead of expiration next month purchased approximately 1,700 calls at the November $12 strike for an average premium of $0.50 apiece. Call buyers stand ready to make money if SVU’s shares rally another 4.9% over today’s high of $11.92 to surpass the average breakeven point at $12.50 by November expiration. Supervalu’s overall reading of options implied volatility is up 22.8% at 47.98% just before 12:25 pm ET. Investors buying up calls on SVU appear bullish on the stock ahead of the firm’s second-quarter earnings report scheduled for release before the opening bell on October 19, 2010.
Isilon Systems, Inc. (ISLN) – An investor expecting Isilon’s shares to shift significantly come November expiration purchased a call spread and initiated a long stance in protective put options on the stock this morning. Shares of the computer services company are currently down 2.8% at $25.40 as of 12:30 pm ET. Isilon’s shares have come roaring back to life this year, rallying up 328.7% since touching down at a 2010-low of $6.15 on January 29, to touch a 52-week high of $26.37 on October 8. The purchase of a call spread suggests the investor is looking for ISLN shares to hit new highs by November expiration, while the purchase of put options represents protective positioning in case the bullish prediction fails to pan out. Isilon reports third-quarter earnings before the market opens on October 21, 2010. The options strategist paid a net $1.95 per contract, buying 3,000 calls at the November $30 strike, selling 3,000 calls at the higher November $35 strike, and purchasing 3,000 puts at the November $22.5 strike. Profits start to accumulate for the trader if shares surge 25.8% over the current price of $25.40 to surpass the effective breakeven point on the call spread at $31.95 by expiration day. Maximum potential profits of $3.05 per contract are available to the trader if shares jump 37.8% to exceed $35.00 by November expiration. Finally, the puts are a profitable acquisition for the investor if Isilon’s shares plunge 19.1% lower to trade below the effective breakeven price of $20.55 by expiration day next month.
Xerox Corp. (XRX) – It looks like one big options player is betting that the value of Xerox’s shares will trade within a certain range through expiration in April 2011 by selling a large-volume strangle on the stock today. Shares of the maker of electronic office equipment are up nearly 1.40% to stand at $11.10 as of 12:10 pm ET. The trader appears to have sold approximately 40,000 puts at the April 2011 $9.0 strike at a premium of $0.42 each, and shed the same number of calls at the higher April 2011 $12 strike for a premium of $0.71 apiece. Gross premium pocketed by the investor amounts to $1.13 per contract. The trader keeps the full premium received on the short strangle as long as shares in Xerox exceed $9.00 and trade below $12.00 through expiration day in April. Short stances in both call and put options expose the investor to losses in the event that XRX’s shares rally above the upper breakeven price of $13.13, or if shares slip beneath the lower breakeven point at $7.87, by April expiration. Xerox’s shares are currently trading $0.62 below the current 52-week high of $11.72, attained back on April 23, 2010.
Momenta Pharmaceuticals, Inc. (MNTA) – The biotechnology company popped up on our scanners this morning after one investor dabbled in near-term put options. Momenta’s shares are down 0.07% at $14.13 as of 11:25 am ET. It looks like the investor is likely rolling a 4,000-lot long put stance in the October contract forward to the November contract, trading in the single-legged position for a debit put spread in the longer-dated expiry. The trader sold 4,000 puts at the October $14 strike for a premium of $0.50 each in order to buy the same number of puts at the November $14 strike at a premium of $1.50 apiece. Additionally, the investor sold 4,000 puts at the lower November $10 strike for a premium of $0.20 a-pop. The net cost of the transaction, in isolation, amounts to $0.80 per contract and positions the investor to profit, or realize downside protection should he hold a long position in MNTA shares, if Momenta’s shares fall 6.6% to trade below the breakeven price of $13.20 by November expiration. Maximum potential profits of $3.20 per contract are available to the investor if shares plunge 29.2% lower to trade below $10.00 by expiration day next month.
Chevron Corp. (CVX) – One bearish options strategist expecting Chevron’s shares to trend lower ahead of expiration in January 2011 initiated a ratio put spread on the stock in the first 30 minutes of the trading session. Shares of the oil and gas company are currently down 0.30% to stand at $83.68 as of 11:15 am ET. The investor picked up 3,500 puts at the January 2011 $80 strike at a premium of $2.77 each, and sold 7,000 puts at the lower January 2011 $72.5 strike for a premium of $1.20 apiece. Net premium paid to establish the spread reduces to $0.37 per contract. Thus, the trader is prepared to profit should Chevron’s shares slide 4.8% lower to breach the effective breakeven price of $79.63 by expiration day next year. Maximum potential profits of $7.13 per contract are available to the investor if the price of the underlying stock plummets 13.4% from the current price to settle at $72.50. The overall reading of options implied volatility on CVX is up 5.00% at 20.00% as of 11:20 am ET.