Monday Options Update: FIS, AXL, PGN, HAS, GDX & MYL

Includes: AXL, DUK, FIS, GDX, HAS, MYL
by: Interactive Brokers

Fidelity National Information Services (NYSE:FIS)A three-legged options combination play on the global provider of banking and payments technology solutions, processing services and information-based services, indicates one strategist is long-term bullish on Fidelity National Information Services. Shares in FIS are currently up 0.20% to stand at $28.55 in the final 20 minutes of the session. The transaction positions the investor to attain maximum possible profits in the position if FIS shares break well above the current 52-week high of $30.78 on the stock. The options player sold 1,105 puts at the January 2012 $22.5 strike for an average premium of $1.03 each in order to offset the cost of buying the same number of January 2012 $30 strike calls at an average premium of $2.23 apiece, marked against the sale of 1,105 calls at the higher January 2012 $32.5 strike for an average premium of $1.05 a-pop. Net premium paid to initiate the three-legged spread amounts to $0.15 per contract. Thus, the options trader stands ready to make money should FIS shares surge 5.6% over the current price of $28.55 to exceed the average breakeven point to the upside at $30.15 ahead of expiration day next January. Maximum potential profits of $2.35 per contract are available to the trader should shares in Fidelity National Information Services jump 13.8% to trade above $32.50 before the contracts expire in 2012.

American Axle & Manufacturing Holdings, Inc. (NYSE:AXL)Shares of the auto parts manufacturer shot up as much as 9.0% this afternoon to secure an intraday high of $15.25 by 3:40pm in New York trading on unconfirmed takeover chatter. Rumors that Magna International Inc. may place a $23 to $25 cash bid for AXL spurred a rally in the price of the American Axle’s shares and drove speculators to options in the name. Additionally, analysts at JPMorgan Chase & Co. reportedly rated AXL at ‘overweight’ and said shares could move into the upper-teens in the next 12-24 months. Near-term call options are far and away the most popular make and model changing hands on the stock today. Investors exchanged more than 3,500 now in-the-money calls at the January $15 strike versus previously existing open interest of 755 at that strike. It looks like more than half of these calls were purchased at an average premium of $0.36 apiece. Bullish sentiment spread to the higher January $16 strike where another 1,050 calls were picked up for an average premium of $0.13 per contract. Call buyers at this strike are prepared to make money should shares in American Axle rally another 5.8% over the current price of $15.25 to surpass the average breakeven point on the upside at $16.13 by January expiration. Notable call buying also took place at the February $16 and $17 strikes this afternoon. Options implied volatility on the auto parts maker is up 9.5% at 51.71% in the final 30 minutes of the trading session.

Progress Energy, Inc. (PGN) The energy company popped up on our scanners this morning after one strategist dabbled in Progress Energy stock, call and put options. Progress Energy’s shares fell 1.95% to $43.85 by 12:55pm despite reports that Duke Energy is buying the firm for more than $13 billion in a stock deal that, if approved, will create the utility with the largest number of U.S. customers. It looks like the options investor is taking a cautiously optimistic stance on Progress Energy, initiating a buy-write strategy while hedging the position with long puts in the February contract. The trader purchased 250,000 shares of the underlying stock at a price of $43.95 each this morning and sold 2,500 February $45 calls at a premium of $0.55 apiece. If shares rebound, the investor may gain 3.7% on the rise in shares from an effective purchase price of $43.40 – factoring in premium received on the sale of the call options – to $45.00. The shares may be called from the buy-write strategist if Progress Energy’s shares rise at least 2.6% over the current price of $43.85 to exceed $45.00 by February expiration. Meanwhile, the long puts protect the investor in case shares in Progress continue to decline ahead of expiration day next month. The trader bought 2,500 put options at the February $41 strike for a premium of $0.25 apiece. Thus, downside protection kicks in if PGN shares plunge 7.1% to breach the effective breakeven point on the downside at $40.75 by expiration next month. Progress Energy is scheduled to report fourth-quarter earnings before the market opens on February 18, 2011, which is the same day February contract options expire. News of the Duke Energy buyout of the company sent PGN’s overall reading of options implied volatility down 13.1% to 14.55% by 1:10pm.

Hasbro, Inc. (NASDAQ:HAS)Call options on the Rhode Island-based provider of games and entertainment products are popular with investors placing bullish bets on the toy maker less than one month before the firm reports first-quarter earnings before trading begins on February 7, 2011. Shares in Hasbro are currently down 0.35% to stand at $45.91 as of 12:20pm in New York. Goldman Sachs maintained its ‘Conviction Buy’ rating on the stock last week and said Hasbro’s earnings may surprise to the upside. Traders positioning for a rally in the price of the underlying shares picked up more than 3,000 calls at the February $52.5 strike at a premium of $0.20 per contract this morning. Call buyers are prepared to make money should HAS shares surge 14.8% to surpass the average breakeven point at $52.70 ahead of expiration day in February. Approximately 4,400 calls changed hands at the February $52.5 strike thus far in the session, versus paltry previously existing open interest of just 75 contracts at that strike. The sharp rise in demand for call options on Hasbro helped lift the stock’s overall reading of options implied volatility 16.4% to 31.32% by 12:25pm.

Market Vectors Gold Miners Index ETF (NYSEARCA:GDX) It looks like one options player is taking profits off the table by buying-to-close a previously established short stance in deep out-of-the-money March contract call options on the gold miners ETF. Shares of the GDX, an exchange-traded fund designed to replicate the price and yield performance of the NYSE Arca Gold Miners Index, are up 0.35% to arrive at $56.94 as of 1:15pm. It appears that some 15,000 March $68 strike calls were sold for an average premium of $0.91 each back on December 22, 2010, when the fund’s shares were trading around $60.20. Today, the trader purchased 15,000 calls at that strike for an average premium of $0.39 a-pop. Buying back the short calls results in average net profits of $0.52 per contract under these parameters. The level of open interest in calls at the March $68 strike should fall from 16,374 lots to less than 2,000 contracts overnight if this trader is indeed closing out the large short put stance initiated at the end of last year.

Mylan, Inc. (NASDAQ:MYL) Activity in near-term call options on the manufacturer of generic and branded generic drugs suggests some investors see shares in Mylan rising ahead of expiration day this month. The pharmaceutical company’s shares earlier increased as much as 1.00% to secure an intraday high of $22.55, but slipped lower in early afternoon trading to stand 0.20% lower on the session at $22.27 as of 12:30pm. Analysts at Morgan Stanley reiterated an ‘overweight’ rating on Mylan with a $25.00 price target on the stock last week. Bullish players itching for a rally in Mylan’s shares picked up 1,200 call options at the January $22.5 strike for an average premium of $0.43 each. Call buyers at this strike stand prepared to profit should shares exceed the average breakeven price of $22.93 ahead of January expiration day. Investors hoping to see the drug maker’s shares rally to new heights ahead of expiration purchased some 1,900 calls at the higher January $24 strike for an average premium of $0.11 a-pop. Higher-strike call buyers profit if Mylan’s shares surge 8.3% over the current price of $22.27 to surpass the average breakeven point at $24.11 by January expiration. Roughly 3,475 calls have changed hands at the January $24 strike today, which is more than two times the volume in previously existing open interest at that strike. Options implied volatility on Mylan, Inc. is up 13.1% as of 12:40pm to stand at 29.01%.