United Continental Holdings, Inc. (UAL) – The world’s largest carrier jumped up on our ‘most active by options volume’ market scanner earlier today after one bullish options player purchased a large call spread in the December contract. Shares in United Continental rose 0.90% this afternoon to trade at $27.42 as of 3:00 pm. The investor purchased approximately 11,200 calls at the December $29 strike for a premium of $0.72 each, and sold the same number of calls at the higher December $31 strike at a premium of $0.32 each. Paying a net $0.40 per contract for the spread, the investor is prepared to profit should shares in UAL surge 7.2% over the current price of $27.42 to surpass the effective breakeven point to the upside at $29.40 by expiration day. The trader is poised to accumulate maximum potential profits of $1.60 per contract, roughly $1.792 million, if the airline operator’s shares jump 13.05% and trade above $31.00 by expiration in December.
Kohl’s Corp. (KSS) – Massive prints in Kohl’s Corp. call and put options caught our eye this afternoon. Shares of the department store operator that sells nationally recognized as well as privately branded goods increased as much as 4.165% in the second half of the session to touch an intraday high of $52.76. It looks like the investor responsible for the mammoth transaction sold 50,000 puts at the December $50 strike for a premium of $0.85 each, and purchased the same number of calls up at the December $57.5 strike at a premium of $0.30 apiece. The risk reversal was tied to the sale of 2.15 million shares of the underlying stock at a price of $52.12 on a 0.43 delta. The investor receives a net credit of $0.55 per contract on the risk reversal.
Ann Taylor Stores Corp. (ANN) – Bullish options traders tried call options on for size at the retailer of women’s apparel, shoes and accessories today ahead of the firm’s third quarter earnings report, which is scheduled for release ahead of the opening bell on Friday. Shares in Ann Taylor are currently up 6.55% at $24.11 as of 3:15 pm. Almost all of the options action on the women’s clothing company today centered at the November $25 strike where 5,400 calls were purchased at a premium of $0.30 a-pop. Volume in November $25 strike calls is more than 10.3 times greater than the 521 contracts representing previously existing open interest at that strike. Call buyers make money if the price of the underlying stock jumps 4.9% over the current price of $24.11 to exceed the effective breakeven point at $25.30 by expiration on Friday. Chico’s FAS Inc., another women’s apparel retailer, reported better-than-expected third quarter earnings this morning and helped lift ANN’s shares during the current session.
Coca-Cola Co. (KO) – One options strategist populating Coca-Cola Co. this afternoon foresees the beverage maker’s shares trading within a specific range through May 2011 expiration. The investor appears to have sold a sizeable straddle on Coke today with shares currently trading higher by 0.85% at $62.60 as of 1:55 pm in New York. The straddle player sold 5,170 in-the-money calls at the May 2011 $62.5 strike for a premium of $2.80 each and shed 5,170 puts at the same strike at a premium of $3.43 a-pop. Gross premium enjoyed by the straddle-seller amounts to $6.23 per contract for a total of $3,220,910. The investor keeps the full amount of premium received on the sale if the soda maker’s shares settle at $62.50 at expiration. Profits erode should shares shift in either direction away from the central strike price going forward. Short stances in both call and put options expose the trader to losses in the event that shares rally above the upper breakeven price of $68.73, or if shares slip beneath the lower breakeven point at $56.27, ahead of May expiration. Shares in Coca-Cola have not exceeded $63.32, the highest recorded price in its shares in nearly three years, since January of 2008, and have traded above $56.27 since September 2, 2010.
SINA Corp. (SINA) – Shares of the owner of China’s third-most visited website rallied as much as 8.3% today to hit an intraday high of $61.73 after the company said third-quarter profit jumped 87% on the rise in online advertising revenue. SINA reported third-quarter results after the closing bell on Tuesday night and said it earned $0.48 a share or $31.3 million, which beat average analysts expectations of $26.8 million. Shares surged in U.S. trading even though SINA’s fourth-quarter sales estimate of $103 to $106 million fell short of the average of $109.9 million analysts are expecting. Analysts at Stifel Nicolaus rated SINA Corp. new ‘buy’ with a price target of $75.00, while analysts at Deutsche Bank cut the firm to ‘hold’ from ‘buy’ with a 12-month target share price of $55.00. Shares are currently up 6.05% at $60.44 just before 1:00 pm in New York trading. The majority of options transactions on the stock today appear to be the work of bullish investors positioning for additional short-term gains in the price of the underlying shares. Traders picked up more than 1,250 deep in-the-money calls at the November $57.5 strike for an average premium of $2.41 right out of the gate this morning. Call buyers at this strike are poised to profit should SINA’s shares exceed the average breakeven price of $59.91 through expiration on Friday. Premium on these calls is up sharply since this morning with the bid/ask on the contracts currently at $2.95/$3.20 per contract. Bullish sentiment spread to the higher November $60 strike where another 1,300 in-the-money calls were purchased for an average premium of $1.25 apiece. Traders holding these contracts make money if shares in SINA Corp. rise 1.34% to trade above the breakeven at $61.25 ahead of November expiration. Call options were also active at the higher November $62.5 and $65 strike prices where more than 1,450 contracts changed hands at each strike by 1:05 pm. SINA’s overall reading of options implied volatility plunged 15.7% this afternoon to 47.79% post earnings.
Financial Select Sector SPDR Fund (XLF) – A sizeable bullish butterfly spread initiated on the Financial SPDR within the first 30 minutes of the trading session this morning suggests one big options player expects the price of the underlying fund to rebound ahead of January 2011 expiration. Shares of the XLF, an exchange-traded fund that tracks the price and yield performance of the Financial Select Sector of the S&P 500 Index, are currently down 0.35% to stand at $14.71 as of 11:30 am in New York. It looks like the financial sector optimist picked up 20,000 in-the-money calls at the January 2011 $14 strike for a premium of $1.12 each, sold 40,000 calls at the January 2011 $15 strike at a premium of $0.54 apiece, and purchased 20,000 calls up at the January 2011 $16 strike for premium of $0.22 a-pop. Net premium paid to establish the butterfly spread amounts to $0.26 per contract. Thus, the trader is prepared to make money should the fund’s shares exceed the effective breakeven price of $14.26 at expiration. Maximum potential profits of $0.74 per contract or $1.48 million are available to the investor should shares rise up to- and settle at- $15.00 at expiration day in a couple of months. The investor’s profits start to erode in the event that shares of the XLF rise above $15.00, and disappear completely above the upper breakeven price of $15.74. The butterfly-spreader could wind up losing the full $0.26 per contract or $520,000 he paid to initiate the transaction today if shares jump 8.8% over the current price of $14.71 to trade above $16.00 by January expiration.
Forest Laboratories, Inc. (FRX) – The maker of branded prescription and over-the-counter drug products popped up on our scanners this morning after a chunk of call options changed hands in the November contract. It looks like the investor behind the trade is taking profits off the table by closing out a previously established position. Shares of the drug manufacturer are up 0.85% this morning to arrive at $32.18 as of 11:45 am. The trader appears to have originally sold 5,000 calls at the November $35 strike for a premium of $0.45 apiece back on October 14, 2010, when shares in Forest Laboratories were on the up-and-up, trading around $33.23. Selling out-of-the-money calls during the rally in FRX shares at the time was, in hindsight, a nice move. The investor was able to buy back all 5,000 contracts today for just $0.05 per contract. The closing purchase results in net profit of $0.40 per contract, or total profits of $200,000. Perhaps the decision to close out the short stance in calls today is a sign the investor sees shares of the drug maker heading higher in the next couple of days before expiration. Options implied volatility on the stock is lower by 5.7% to stand at 25.01% just before midday on the East Coast.
Owens-Illinois, Inc. (OI) – Bullish options traders dabbled in December contract put options on the world’s largest manufacturer of glass containers today with shares in Owens-Illinois trading higher by 0.30% to stand at $27.30 as of 12:35 pm in New York. Investors sold approximately 2,800 put options at the December $26 strike to pocket premium of $0.60 per contract. Put sellers keep the full premium received on the transaction as long as the container maker’s shares exceed $26.00 through expiration day. Options traders selling the put contracts do not expect to see shares slide lower ahead of expiration next month, but are willing to have shares of the underlying stock put to them at an average price of $25.40 in the event that the puts land in-the-money by expiration in December. Investors absorb losses on the short put position if OI’s shares fall 6.95% from the current price of $27.30 to trade below the effective lower breakeven point at $25.40.