Friday's Options Outlook: S, PENN, CFC, NAT, EK, AIG, XLF, NVDA, PCLN, ENER, GNW

Sprint (S) – With news of Sprint’s WiMax venture with Clearwire (CLWR) now safely digested by the market, option traders are turning their attention to Sprint earnings on Monday. Shares in the telecom are up nearly 7% today to $9.62, and while the fact that implied volatility is up by a third today suggests heightened risk of volatile price action to the upside or the down (front month options are pricing in as much as a $1.25 move), the volume heavily favors the call side of the equation. Heavy buying in May calls at strikes of 9 and 10 have been observed on a total volume of nearly 82,000 lots, with long interest extending into the same strike in the June contract.

Penn National Gaming (PENN) – Deal arbitrageurs have done a brisk business speculating on the fate of Penn National Gaming, the owner of West Virginia’s Charles Town Races and 17 other casinos and horse racing outfits nationwide. Last June the company agreed to a $67-per-share takeover by a consortium led by Fortress Investment Group, but the company has failed to trade anywhere near that level ever since – and in fact, hasn’t traded above $60 this year. Uncertainty over the outcome of the deal is written all over its implied volatility reading, which has continued to gap ever higher above the historic reading since the Mississippi Gaming Commission approved the merger on April 17, and now at 86.6% is two and a half times the historic measure. Today its shares took another 3% hit on the chin to read $40.28, and the 9-fold increase in option activity looks like the result of traders using ratio call spread activity in the July contract to express a view on a settling price for the stock. It looks as though traders sold 2 July 60 calls for $1.30 for 1 July 50 call for $4.20. The resulting $1.60 debit would break even for the trader if shares penetrated $51.60 by July – still more than $10 above current levels.

Countrywide (CFC) – Merger arbitrage has also been a prevalent driver in options of Countrywide Financial over the past week, as the company still reels from an S&P downgrade and ongoing uncertainty as to the terms and conditions of its storied bailout by Bank of America. The 146.6% implied volatility reading – which dwarfs the 84% degree of fluctuation that Countrywide shares have already endured – is a strong indicator that option traders feel its share price faces particular peril over the next 30 days and are pricing the option accordingly. Countrywide shares are down 6% today at $4.73. Puts – which protect against downside share price action – will be particularly dear in this environment, but the higher prices haven’t detracted option traders from deploying 6 times as many puts as calls today. Nearly half today’s 55,000-lot volume is situated in June 3 puts, which traded to the middle of the market at 35 cents – which looks to us like a play on renewed concern that Bank of America will either look for a lower sale price for Countrywide, take on less of its debt, or perhaps even walk away from the deal entirely.

Nordic American Tanker Shipping (NAT) – Crude oil’s continued ascent to nosebleed-level prices continued today with a breach of the $126-per-barrel price level today. This marked the fifth consecutive day of record highs for the commodity, whose fiery trail has been fueled by fundamental demand pressures and its flames fanned by a weak dollar. It is against this backdrop of U.S. demand both tense and rampant that we observed a 20% intraday spike in options implied volatility of Nordic American Tanker Shipping, the Bermuda-registered, Norwegian-based worldwide transporter of crude oil from the oil-rich Scandies to the Americas. Shares tacked on a 6.7% gain to $39.10 and the disparity between historic and implied volatility suggests even more turbulence in the weeks to come, this fully three days after the company reported bullish quarterly earnings. Its numbers in the most recent earnings cycle owed much of their zest to higher spot prices in the shipping business and a shortage in the number of Very Large Crude Carriers (VLCC), making Nordic American’s services much dearer in the current oil-crazed climate. Today’s option volume of 4,453 lots was modest in absolute terms, but stacked up to 30% of the company’s total open interest, and was indicated by fresh call-buying at the $40 strike in the May and June contracts. Upside ahoy…?

Eastman Kodak (EK) – Turnaround buzz continues in camera giant Eastman Kodak, which despite a 3.4% gain for shares to $17.13 today is still lingering around multi-year lows. Earlier today its 11,670-strong option volume elicited a brief appearance on our market scanner of “Most Active Option Contracts,” with the 9-to-1 overweight of calls marking a second consecutive day of pronounced call volume. Most of today’s action is tied up in call buying at the June 17.50 and 20 strikes, with no particular news catalyst to readily ascribe the action. Curiouser still is this week’s 30% move higher in implied volatility, with the current 47.6% implied volatility reading suggesting particularly acute price risk in Eastman Kodak shares over the next 30 days.

AIG (AIG) –Today’s 8% drop for American International Group shares to $40.52 on back of a $7.8 billion Q1 net loss and outlook for even more sent shudders through the broader market – but the rise in put volume we observed in recent session was a strong indication that option traders sensed this might be the case. The May $43 puts that traded heavily late Wednesday at 44 cents are worth $2.30 today, representing quite a windfall for traders who bought defense early. There’s still a broad willingness among many option traders to seek protection at out-of-the-money put strikes, notably at the May $40 line, but buying interest in May 45 calls was also observed – at 16 cents it’s hard to say whether this is a cheap-bet on post-selloff stabilization or simply a shrewd price point at which to close out an open short position in the call.

Financial Sector ETF (XLF) –Shares in the financial sector ETF are down .81% today to $26.19, respectable enough given AIG’s staggering quarterly loss yesterday evening. With more than 245,000 options trading this afternoon, the XLF is once again one of the most heavily trafficked tickers on our platform. Volume of note earlier today included selling in May 26 puts at 54 cents apiece on a volume of 35,000 lots that is still within existing open interest at that strike. Selling in June 28 calls at 33 cents apiece and buying in 23 puts for 28 cents on comparable volumes suggest to us that a trader may be looking to protect a long position in the financial sector from AIG-related aftershocks by buying a collar at those strikes. Long exposure to the lower-priced put would protect a trader from another leg lower in financials, while the price difference between the two positions would still allow him or her to take a 5-cent credit on the transaction.

Nvidia (NVDA) –Shares in semiconductor maker Nvidia rose 2.5% this afternoon to $22.51 despite reporting Q1 profits that fell short of the consensus. The outlook for more positive future earnings led to an analyst upgrade that appears to have stoppered any selloff in the stock. This disparity between present facts versus future outlook in Nvidia also offered a rare opportunity for option traders to arbitrage on option prices. We think this explains the level of two-way traffic at the 22.50 May line, where the calls traded to buyers and sellers on a volume of some 18,500 lots today – nearly a quarter of the current volume as of noon – and the puts traded to buyers and sellers more than 12,000 times.

Priceline.com (PCLN) – Standing almost as a bullish foil to the meltdown in shares of high-end auction house Sotheby’s (BID) today is Priceline.com. Shares in the discount travel agency rose 14% to $141.38 after guiding year-end profits far higher than prior street estimates. The forecast appeared to underscore the thirst for bargains in the present economic environment, giving option traders reason to believe that Priceline will find a stable and dependable reception for its services. Implied volatility on all Priceline.com options declined nearly 30% as a result, and option volume more than doubled from average daily levels. Most of this was situated in two-way traffic in May calls at the 140, 145 and 150 strikes.

Energy Conversion Devices (ENER) – Shares in the maker of thin-film solar laminates pulled back 4% to $47.90 this afternoon after brushing the $50 level (a new high) in early trading. Activity in its options remains unusually juiced, showing a near 7-fold increase in trading according to our market scanner. What’s noteworthy here is that much of the option activity is fresh – exceeding prior open interest even after a Thursday session in which its options garnered 24 times the normal level of activity. Also interesting is the implication from today’s volume that some option traders feel this morning’s pullback was overdone and may be looking for a new leg higher. This seemed to be the message of activity in May 45 puts, which sold heavily on a total volume nearly triple the open interest. Calls at the May 50 line were bought more often than sold, with the 95-cent premium reflecting a 1-in-3 chance of Energy Conversion Devices closing above $50 next week.

Genworth Financial (GNQ) – Despite the dreary tone set back AIG’s loss, we observed bullish price and options action in another multiline insurer, Genworth Financial. Shares are up 1% to $22.57 today, as options are showing an 8-fold increase from the normal level, trading more than twice as often to calls as to puts. Most of today’s volume is localized in the January contract, with heavy buying at the 25 line for $2.10 per contract. Additional long interest at the 25 put line would ordinarily suggest that some traders were buying these positions together in long-straddles – we note, however, that at $6.60 a straddle at this strike would represent nearly 30% of today’s share price, requiring a massive move by January just to break even.

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Comments

[Medici]

Genworth's symbol is GNW not GNQ, just an FYI

[Geoffrey]

Can someone explain the how the rise in NVDA share price "offered a rare opportunity for option traders to arbitrage on option prices."

[H2O]

Hey get a list of your home town for sale house's - 80% are crap.

guess the people being treated like crap - are leaving the home's like crap.

[H2O]

Why do the Rich explot - The problems of the Poor?

They had a free hand - to destroy the lifes of Americans - and
They actually think it was a good thing.

Weird values.


Hillary Clintons - Racist Roots are Showing

What gets me the most about Hillary and her army - Is they exploted racial divides
- and went for the old school dems - from kkk members - Bible totting - you convert
by the gun - Hardcores.

It's like all along - Her roots are showing - The GoldWater girl - looking to kill
any civil rights gains - over the past 40 years.

Basically she exploted her racist roots - and even through - Goldwater racist - nuking people.

[H2O]

Embolden - terrorists - Simple Question?

Bill Clinton had a chance to have Osama - Sent from Sudan to the United States - BUT LET HIM GO
- Then 9/11 and Bush had a chance to capture Osama - BUT LET HIM GO - With the LIES OF IRAQ - NOw
McCain is following right along with that - LET THE TERROIST GO - MENTALITY - Stay in Iraq - Let
the terro's GO.

So what Emboldens the terrorists more - Bring them to Justice? Or Letting them GO?

And getting out of IRAQ is easy and simple - Blow everything up dealing with oil fields - and march
the troops right out of there - Terro's really cann't ship any oil or fix the oil fields - Contrary
to the LIES of Washington Insiders - and if IRAQIES want to live the hell of war - Thats there choice.

It's not like we were told - IRAQ WOULD PAY FOR ITSELF - and OIL AT 2 DOLLARS A BARREL.

Iraq would be just another Lebanon or Gaza - and who cares about PEACE there?

SO where do these IDIOT LIARS IN WASHINGTO think Americans are from? West Virginia?



"""&quo... Bush warned in an interview Tuesday that the Democratic presidential candidates' plans to
withdraw abruptly from Iraq could "eventually lead to another attack on the United States" and
would "embolden" terrorists.""...

[H2O]

How Bush's grandfather helped Hitler's rise to power
Commentary by DeepJournal
Most of this information I have published in my documentary on Skull & Bones in 1999 for Dutch television. The documentary was censored upon release and has not been shown to the public.
Also see this interview with Antony Sutton about this affair and see for more information on Prescott Bush, Skull & Bones and the Nazis this chapter in George Bush - The Unauthorized Biography, by Webster Tarpley and Anton Chaitkin.

-

Rumours of a link between the US first family and the Nazi war machine have circulated for decades. Now the Guardian can reveal how repercussions of events that culminated in action under the Trading with the Enemy Act are still being felt by today's president

Ben Aris in Berlin and Duncan Campbell in Washington
Saturday September 25, 2004
The Guardian


George Bush's grandfather, the late US senator Prescott Bush, was a director and shareholder of companies that profited from their involvement with the financial backers of Nazi Germany.
The Guardian has obtained confirmation from newly discovered files in the US National Archives that a firm of which Prescott Bush was a director was involved with the financial architects of Nazism.

His business dealings, which continued until his company's assets were seized in 1942 under the Trading with the Enemy Act, has led more than 60 years later to a civil action for damages being brought in Germany against the Bush family by two former slave labourers at Auschwitz and to a hum of pre-election controversy.


The evidence has also prompted one former US Nazi war crimes prosecutor to argue that the late senator's action should have been grounds for prosecution for giving aid and comfort to the enemy.

www.deepjournal.com/p/...

[H2O]

Hey America – Did The IRAQ War of Lies – Make You Safer Today?

How safe are you paying 4.00 a gallon for gas – and maybe more very soon?
How safe are you with open border’s - let anyone in?
How safe are you with cheap slave labor taking all your jobs?
How safe are you – paying a trillion dollars for the IRAQ war of LIES – while the rich pay nothing
- And you’re thrown out of your houses?
How safe are you today – paying for food – you can buy – only half as much?
Tell me America – Just how blessed are you - after – allowing another country to decide – Your foreign policy?

Tell me America – Just how g-d has showered you with blessings? For going down a path of LIES?