DISH Network Corp. (DISH) – Investors were busy buying call options on the provider of direct broadcast satellite subscription television service straight out of the gate this morning on speculation the company may have what AT&T needs after the potential deal with Deutsche Telekom’s T-Mobile USA unit fell through. Shares in DISH Network rallied sharply on news of the failed merger as analysts directed attention to the Englewood, Colorado-based Company’s spectrum, an attractive asset to AT&T, which needs to bulk up on wireless airwaves. DISH’s shares increased as much as 9.4% to $27.50 in the first half of the session, spurring some strategists to snap up call options in the front month. It looks like investors prepping for shares in DISH Network to extend gains in the near term purchased around 1,250 in-the-money calls at the Jan. 2012 $27 strike for an average premium of $1.50 each. Call buyers stand ready to profit at expiration next month in the event that shares in DISH rally another 3.6% to exceed the effective breakeven price of $28.50. Bullish activity spread to the Jan. 2012 $29 strike where some 230 calls were purchased at a premium of $0.65 per contract. DISH Network’s shares must soar 7.8% to top $29.65 in order for higher-strike call buyers to profit at expiration day in January.
Crocs, Inc. (CROX) – Options traders slipped their feet into Crocs call options this morning, with shares in the rubber clog maker climbing as much as 6.7% to $15.53 today. Heavy call volume in the front month suggests some strategists are gearing up for substantial near-term gains in the price of the underlying stock. The company yesterday announced it obtained a five-year $70 million secured revolving line of credit to replace its existing $30 million asset backed line of credit. The CFO of the company said in a release that the new credit agreement provides “additional financial flexibility to invest in our strategic initiatives.” Bullish investors that purchased more than 2,500 calls at the Jan. 2012 $16 strike for an average premium of $0.51 each, stand ready to profit at expiration next month should the stock rally another 6.3% to top the average breakeven price of $16.51. Optimism extended to the higher Jan. 2012 $17.5 strike where traders exchanged more than 3,300 calls against open interest of 1,458 contracts. It appears the majority of these call options were purchased for an average premium of $0.21 apiece. Investors long the higher-strike calls may profit at expiration day next year if shares in CROX surge 14.0% to exceed $17.71. Shares in the shoe maker last traded above $17.71 on November 8.
U.S. Bancorp. (USB) – Call options on the Minneapolis, Minnesota-based financial services provider are far more active than puts today, with the call-to-put ratio topping 5.4 as of 12:45 PM on the East Coast. At times the preponderance of calls over puts may be taken as a bullish sign; however, one large transaction in USB calls appears to have been initiated by an investor taking a bearish stance on the stock. Shares in U.S. Bancorp are up 3.2% at $26.37 as of 12:55 PM in New York. It looks like the strategist purchased 10,000 calls at the Mar. 2012 $28 strike for a premium of $0.68 each, tied to the sale of 320,000 shares of the underlying at $26.13 each on a 32 delta. The synthetic long put created by the investor is a bearish position that may be profitable if shares in U.S. Bancorp pull back from the current level. The trader profits on the short stock if shares drop, while the long calls hedge potential bullish movement in the price of the underlying through expiration in March. USB is scheduled to report fourth-quarter earnings ahead of the open on January 18. The stock currently trades a scant $0.80 below the July 21, 2011, six-month high of $27.17. Had the trader initiated a similar bearish position at the end of July, he would have watched the short stock position grow in value given the sharp 25.0% drop in the price of the underlying to $20.10 during the four weeks that followed. A meltdown in USB and the banking sector similar to the one seen this summer may work in this options trader’s favor in the first quarter of 2012.
Popular, Inc. (BPOP) – The provider of retail and commercial banking services popped up on our ‘hot by options volume’ market scanner today after one investor took a substantial stake in February 2012 contract call options. Shares in Popular, Inc. are currently up 5.4% at $1.18 in early-afternoon trade. The stock has not been popular with investors this year, however, as shares have dropped more than 65.0% since trading at a 52-week high of $3.59 back on February 8, 2011. It looks like the options player responsible for nearly all of the volume in BPOP’s contracts today purchased roughly 5,200 calls at the February 2012 $1.5 strike for an average premium of $0.075 apiece. The bullish position may pay off at expiration day next year if shares in Popular, Inc. surge 33.5% to surpass the effective breakeven price of $1.575. Shares in BPOP last traded above $1.575 back on November 15. The company is scheduled to report fourth-quarter earnings ahead of the opening bell on February 1.