Kinetic Concepts, Inc. (KCI) – Options on the medical technology company sprang to life this morning on a more than 14.6% move up in the value of its shares to $67.38 the highest shares have traded since 2006. The stock rallied on reports the company is in talks to go private in a leveraged buyout and may be worth around $5 billion excluding debt. Traders populating Kinetic options focused mainly on calls, buying and selling in- and out-of-the-money calls in the July, August and September expiries. Mixed trading patterns observed thus far today contrast with more one-sided open interest patterns in now deep in-the-money July contract call options. Investors who appear to have taken long call positions in June are now holding far more valuable contracts. Open interest patterns in the July $60 and $62.5 strikes, the largest blocks of call open interest on Kinetic Concepts, caught our eye. It looks like traders purchased the majority of the 645 open call positions at the July $62.5 strike during the second half of June for an average premium of $0.19 a-pop. These calls are now more than 21 times as expensive following the sharp rally in the price of the underlying. The July $60 strike call has some 1,700 open positions and it looks as though most of these are long calls purchased in the first week of June at an average premium of $0.68 per contract. In just over four weeks, call buyers have seen the value of their positions sky-rocket up to the current asking price of $6.40 apiece.
Accenture PLC (ACN) – Put volume on the global management consulting, technology services and outsourcing company jumped today, with more than 45,000 put options having changed hands on the stock by 11:30 am ET. Shares in Accenture are flat in early-afternoon trade to stand at $61.75. Bears breakfasted on August contract puts, buying more than 3,750 in-the-money options at the August $62.5 strike for an average premium of $2.29 a-pop. Put players purchased contracts at the lower August $57.5 and $55 strikes, as well. Massive prints in the front month appeared several hours into the trading day and may be the work of an investor rolling downside protection, or an outright bearish stance on ACN, up a strike. It looks like some 17,238 puts traded to the middle of the market at the July $60 strike at a premium of $0.34 each. Open interest at this strike indicates roughly similar volume in the July $60 put was purchased for an average premium of $1.05 at the end of June. Meanwhile, a fresh batch of 17,238 in-the-money put options traded to the middle at the July $62.5 strike at a premium of $1.34 apiece against open interest of just 196 contracts. The put player responsible for the large spread on Accenture today may or may not be the same investor that purchased the options at the end of last month. If both legs are fresh trades, rather than a roll-up, the trader like purchased the July $60/$62.5 spread at a net $1.00 per contract to prepare for bearish movement in the price of the underlying stock. Alternatively, the investor may be rolling the July $60 puts up to the $62.5 strike to secure more immediate downside protection in case of a near-term dip in ACN shares. Options implied volatility on the stock ticked up 3.8% to 21.87% this afternoon.
Toyota Motor Co. (TM) – Shares in the world’s largest automaker are up at their highest since mid-May today after the company said its production lines, which were disrupted by the earthquake and tsunami in March, should be back to normal in October, a month earlier than anticipated. Toyota’s shares increased as much as 0.75% to $84.23 during the first half of the trading session. Despite positive comments from the Prius manufacturer it looks like one option strategist is positioning for the price of the underlying to slide ahead of August expiration. The investor may be taking an outright bearish stance on the stock, or hedging a long position in Toyota shares, ahead of the company’s first-quarter earnings report on August 4. The trader initiated a bearish put spread, buying 3,000 puts at the August $82.5 strike for a premium of $1.83 each, and selling the same number of puts at the lower August $77.5 strike at a premium of $0.56 apiece. Net premium paid to initiate the spread amounts to $1.27 per contract. Thus, the put-spreader profits in the event that Toyota’s shares drop 3.6% to breach the effective breakeven price to the downside at $81.23 at expiration next month. The trader could drive away with maximum potential profits of $3.73 per contract if shares in the car maker plunge 8.0% to trade below $77.50 at expiration in August. Toyota’s shares have exceeded $77.50 since April 21.
Yanzhou Coal Mining Company Ltd. (YZC) – The Chinese coal mining company popped up on our scanners this morning after one strategist initiated a bearish stance in August contract put options. Shares in Yanzhou are currently down 2.25% to stand at $38.91 as of 1:10 pm ET. It looks like the trader is positioning for significant, albeit limited, downside movement in the price of the underlying by employing a ratio put spread. The investor purchased 1,000 puts at the August $38 strike for a premium of $2.10 each, and sold 2,000 puts at the lower August $35 strike at a premium of $0.80 apiece. Net premium required to purchase the spread amounts to $0.50 per contract, thus positioning the trader to profit in the event that YZC shares slip 3.6% to trade beneath the effective breakeven point at $37.50 by expiration next month. Maximum potential profits of $2.50 per contract are available to the investor should shares in the coal company drop 10.05% in the next six weeks to settle at $35.00 at expiration.