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Netgear, Inc. (NASDAQ:NTGR) – The maker of networking products for at-home and small business use reported better-than-expected first-quarter earnings on Thursday after the closing bell, and projected second-quarter sales of $270 million, which beat the consensus estimate of $240.3 million. Shares in the San Jose, CA-based company subsequently jumped 28.4% today to secure an intraday- and new all-time high of $43.67. Investors expecting the price of the underlying to trend higher through the next couple of months traded more than 2,800 calls at the June $45 strike on just 10 lots of previously existing open interest. The majority of the call options were purchased for an average premium of $1.35 each. Call buyers make money if shares in Netgear rally another 6.1% over today’s high of $43.67 to surpass the average breakeven price of $46.35 by expiration day in June.

Meanwhile, pre-earnings report buyers of May contract call options have seen the value of their positions sky-rocket today. One trader appears to be taking profits, selling 50 now deep in-the-money calls at the May $31 strike for an average premium of $10.38 each, which he appears to have initially purchased for just $3.60 apiece on Thursday. Open interest levels at the two highest-available strike prices in the front month indicate call buyers paid as much as $0.35 per contract to buy fewer than 100 calls at each of the May $37 and $38 strikes earlier in the week. Today, these same calls tout asking prices of $4.60 and $3.80, respectively. Approximately 4,200 call and put options have changed hands on Netgear just before 1:00pm on overall previously existing open interest of 5,678 contracts on the stock.

Goodyear Tire & Rubber Co. (NASDAQ:GT) – Shares in the largest U.S. tire manufacturer shot up 15.3% during the first half of the trading session to touch an intraday- and new 52-week high of $18.68 after reporting better-than-expected first-quarter profits of $0.42 a share on record sales of $5.4 billion. Investors expecting the Goodyear’s shares to extend gains, at least in the near-term, picked up in- and out-of-the-money call options in the front month. Bulls scooped up more than 2,700 call options at the May $19 strike for an average premium of $0.61 each, on previously existing open interest of just 57 contracts. Traders long the calls make money if shares in Goodyear rally another 5.0% over today’s high of $18.68 to trade above the average breakeven price of $19.61 by expiration day next month. More than 5,900 call options changed hands at the higher May $20 strike on zero lots of open interest. The majority of these contracts were purchased for an average premium of $0.27 a-pop. Buyers of the calls stand ready to profit should shares in the tire maker surge 8.5% to surpass the average breakeven price of $20.27 at expiration in May. More than 52,500 option contracts have changed hands on Goodyear as of 12:20pm. The bulk of the trading is taking place in the May $17 strike calls and the May $15 strike puts, but open interest patterns at these strikes suggest traders may be adjusting positions initiated ahead of Goodyear’s earnings report. Options implied volatility on GT is currently down 8.7% to stand at 44.82% in early-afternoon trade.

Dow Chemical Co. (NYSE:DOW) – Big prints in Dow Chemical call options caught our eye this morning, with shares in the manufacturer of chemicals, plastic materials and agricultural products trading roughly 0.25% higher on the day at $40.81. Dow Chemical reported better-than-expected first-quarter earnings ahead of the opening bell on Thursday, which sent the price of the underlying stock up to a more than 2-year high of $41.40 yesterday. Within the first 30 minutes of trading on Friday, what appears to be a call spread traded 8,700 times at the May $39/$41 strikes. Both legs of the transaction traded to the middle of the market, and open interest in the May $39 strike calls is sufficient to cover volume generated at that strike today.

These two factors make it a bit more difficult to pin down the investor’s intent with this trade. It could be that the trader is buying the spread, paying a net premium of $1.34 per contract in order to position for the price of the underlying stock to rally higher ahead of May expiration. In this scenario, the call-spreader starts making money if the stock climbs above the effective breakeven price of $40.34, thereby garnering maximum potential profits of $0.66 per contract if shares settle above $41.00 at expiration. Alternatively, the investor may be rolling calls up from the May $39 strike to the May $41 strike to extend bullish sentiment on Dow Chemical through expiration next month. Another possibility is that the trader sold the spread to pocket premium in the expectation of a near-term pull back in the price of the underlying. In this case, the investor pockets $1.34 in premium and keeps the full amount if shares in DOW are trading below $39.00 at expiration. Dow Chemical was raised to Overweight from Neutral with a 12-month target share price of $47.00 at JPMorgan this week.

Sprint Nextel Corp. (NYSE:S) – Call options are flying off the shelves at Sprint Nextel Corp. today with shares in the third-largest U.S. wireless carrier rising as much as 4.7% this morning to an intraday- and new 52-week high of $5.35. The company reported first-quarter results ahead of the open on Thursday, and revealed it added more wireless subscribers in the first quarter than it had in five years. More than 12.8 call options are changing hands on the stock today for each single put option in play as of 12:00pm in New York. Fresh positioning in June contract call options indicates some strategists are positioning for the price of the underlying to continue higher in the next couple of months. Investors exchanged more than 22,000 calls at the June $5.5 strike on open interest of just 1,153 contracts.

It looks like the majority of these calls were purchased for an average premium of $0.18 each. Call buyers profit if shares in Sprint rally another 6.2% over today’s high of $5.35 to surpass the average breakeven price of $5.68 at expiration. Optimism spread to the higher June $6.0 strike where one investor picked up 19,000 calls for a premium of $0.07 a pop. The trader makes money if the price of the underlying increases 13.5% to exceed the effective breakeven price of $6.07 at expiration in June.

Source: Friday Options Brief: NTGR, GT, DOW & S