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Sea of Opportunity (http://seaofopportunity.blogspot.com/) is a blog created by a group of options traders in San Francisco, CA. The mission is to analyze what the "big money" is betting on and evaluate the risk reward to see if the trade should be followed or not.
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  • Trade of the Day: Cerner April/June $100 long put calendar
      
     


    The Trade
    A trader sold 10,000 April $100 puts at $1.70, and bought 10,000 June $100 puts at $4.30 for a debit of $2.60 or $2,600,000.
     
    Risk/Reward
    As you can see from the graph above, the long put calendar has unlimited risk and limited profit potential. The maximum profit potential is $6,125,869 at an underlying stock price of $100 at expiration. At this price level at expiration, the short puts would expire worthless, and the long puts would be in the money. The upper break even price level at expiration is $114.75.
     
     
     
    The line shown is the upper break even price level. CERN traded 23,904 contracts today compared to average daily volume of 994. The 52-week range is a low of $72.05 and a high of $104.99. CERN closed today at $103.53, nearly closing at all time highs. It's interesting to note that CERN will report earnings in late April.
     
    Cerner Corporation is a supplier of healthcare information technology solutions, healthcare devices and related services. These solutions are licensed by approximately 9,000 facilities globally, including more than 2,600 hospitals; 3,500 physician practices covering more than 30,000 physicians; 500 ambulatory facilities, such as laboratories, ambulatory centers, cardiac facilities, radiology clinics and surgery centers; 800 home health facilities, and 1,600 retail pharmacies. Cerner Solutions optimize processes for healthcare organizations.
    Tags: CERN, options
    Mar 14 6:44 PM | Link | Comment!
  • Option Flow Recap March 14
     
     
    Click on the company name for a chart.

    Macro / Thematic
     
    SPY SPDR S&P 500 ETF  March 123/128 put 21,600 x, bear vertical.  Very bearish spread with 4 days to work!


    VIX VIX Futures- 25,000 of the May 25 /30 1x2 call spread was bought for $0.375. The May 22.5 / 30 1x2 call spread was bought for $0.50, 10,000x. The March 22.5 / 24 1x2 call spread was bought for $0.11, 10,000x.  Looks to be a hedge.
     
    GLD SPDR Gold Trust (ETFApril 139 straddle trades 3500x

    SLV iShares Silver Trust (ETFMarch $35 straddle trades 4050x


    Consumer
     
    TIVO TiVo Inc. – An investor bought 5800 March 12 calls for $0.10 and sold 6000 March 9 puts at $0.46. Nice credit for a play to pin to 9 or a push even higher on the back of a historically bullish options expiration. 
     
    ERTS Electronic Arts Inc. - A large bullish trade in Electronic Arts with the investor buying 25,000 January’12 22.5 calls for $1.03 and selling 55,000 March 20 calls at $0.04 to close.  Looks like a roll up and out.  ERTS is flagging here.
     
    CAG ConAgra Foods, Inc. - 5000 of the January 25 calls were bought for $0.80 per contract. It was tied to 165k shares at $23.30.
     
    CVS Caremark Corporation - ~6400 of the April 35 calls were bought for $0.38. The contracts were bought to open. Buy'n the dip trade.
     
    LINTA Liberty Media Corp (Interactive- 5000 July 16 puts were sold at $1.05 to open.  200 DMA is around 14ish.  
     
     
    Energy
     
    LDK LDK Solar Co., Ltd.  - 300 of the September 10 / 15 / 20 call fly was purchased for $1.20.  Are the nuclear issues in Japan bullish for solars? I like this trade ~ 1:4 risk/reward.  The 200 DMA is near the lowest strike.  The fly is intrinsically worth $1.5ish here already. Nice cheap bullish trade.  If the stock gets to 15 unwind it or roll it. Don't get greedy...complacency kills!
     
    NOV National-Oilwell Varco, Inc.  - 2400 May 95 calls were bought for $0.70.  If its not a hedge they are looking for all time highs.
     
    ATPG ATP Oil & Gas Corporation - 1750 April 14 puts were bought for $0.36 to open, ahead of earnings.  Targeting the 200DMA as shares have recently broken their uptrend and 50DMA. 
     
     
    Industrials / Materials
     
    GE General Electric Company - 1000 December 21 calls were purchased for $1.31 to open.  Trader buying the dip.  I heard Doug Kass was buying GE today.
     
    USU USEC Inc. - 4400 October 6 calls were sold at $0.25. Appears to be an opening call write. The contract is almost 30 percent out-of-the-money.  
     
     
    Tech
     
    CERN Cerner Corporation - One strategist paid $2.60 for the April - June 100 put spread, 10,000x.  The stock is in a strong up trend.  
     
    AMAT Applied Materials, Inc. - 4000 April 15 puts were bought for $0.67, to open.  $13.34 gap fill. 
     
     
    Financials
     
    BAC Bank of America Corporation - 10,000 January'13 12.5 calls were purchased for $3.80.  Stock in a triangle here. 
     
     
    Healthcare
     
    GENZ Genzyme Corporation - 12,500 July 75 calls were sold at $1.50.



    *Special thanks to Flotilla Partners, Option Radar, BMO Capital, MEB Options, LiveVolPro, CBOE, Option Monster, and all of the options desks and traders we work with to provide the option flow!


    No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.
    Tags: SPY, GLD, SLV, TIVO, EA, CAG, CVS, LINTA, LDK, NOV, ATPG, GE, USU, CERN, AMAT, BAC, SNY, options
    Mar 14 6:44 PM | Link | 1 Comment
  • Coinstar Straddle Sale
     Trade of the Day: Coinstar Straddle Sale
     


    An interesting trade today in Coinstar, ticker CSTR. A trader sold April $42 straddles @ $5.15 2700x with the stock at $42.67. The trader sold an IV of approximately 51.5% and is counting on CSTR not moving more than $5.15 between now and expiration. A curious conclusion (IMO) given that the stock has recently experienced some serious volatility!




    Courtesy: LivevolPro
    Since pre-announcing some negative results back in January, the stock has traded in a tight range and the IV30 has stayed pretty steady at around the 50% level. The purple line, which shows the realized volatility over the preceding 120 days, ominously remains elevated near 70%.

     
    Daytradenumbers.com


    A confluence of pivot points (shown above) at the $42 area with the monthly pivot and weekly S1 in the general vicinity, suggest some price support may occur at this level although I'm not sure I would make too much of this under these circumstances.



    Courtesy: LivevolPro
    Skew isn't screaming out why this trade was done, so why the heck is the trader selling this straddle???

    Well, if I had to guess, I think the trader is counting on the fact there is nothing between now and earnings (earnings which presumably would occur after April expiration). A trader selling this straddle would also be counting on the company avoiding another negative pre-announcement such as the one that rocked the stock in January - something that would be hard to predict in uncertain times. The recent lows in IV30 have been around 40 so its hard to fathom that the trader would simply be putting on the trade for a 10 pt vol move, but certainly possible nonetheless.

    The trade works if the stock is above $37.52 or below $47.82. If the stock is at $42 exactly, the trader will keep the credit, or nearly $1.4mm. We will have to keep an eye on this one.


    No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.
    Tags: C, options
    Mar 14 6:42 PM | Link | Comment!
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