Intra-Day Significant Options Activity
ETF / Indices Mentioned: BKX
Stocks Mentioned: BSX, BPOP, CFC, CRM, EDS, MCO, NUE, ONXX, PALM, PENN, RL, SBUX, TRMP, WMT, X
ETF / Indices
We continue to see put buying in the PHLX Banking Index (BKX, 112.06, -0.40%) today. In one trade investors bought ~1,750 June 107.5 (.25d) puts, in another trade investors sold 600 April 110 puts, sold 1,00 April 115 puts and bought 2,000 May 110 puts likely rolling their long put positions from April to May. Earlier this week also saw buyers of May 102.5 puts and we continue to see consistent put buying in several financial equities today such as WM, CFC and CBH.
With Polo Ralph Lauren (RL, 93.97, +1.26%) trading at new 52-week highs today we are seeing unusual activity in the options. In separate trading investors bought ~700 July 90 (.38d) puts and ~800 July 95 (.55d) puts. We saw buyers of July 95 puts earlier this week and we have recently also seen investors buying volatility in the October cycle. This week’s repeat put buying does appear to be bearish.
Upside calls were bid this morning in ONYX Pharmaceuticals Inc. (ONXX, 26.73, +4.21%) as the stock rallied roughly 9%. More specifically, opening investors bought approximately 1,000 each of the April 25 and 30 strike calls and also bought April 35 calls in smaller size. These participants are positioning for further upside in the stock over the next week past the $35 level. ONXX is estimated to report Q1 earnings on 5/4/07.
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Commercial Services - Financial Ratings & Analysis
In Moody's Corp (MCO, 61.60, +1.63%) we continue to see primarily bearish trading in the options. Today, opening investors bought 1,000 May 65 (.70d) puts for $4.60 and yesterday participants bought 1,000 January08 70 (.71d) puts for $10.80. Recent trading has also consisted of an investor who sold 5,000 August 65 calls and investor who bought 5,000 May 65 puts vs. selling August 75 calls (tied to stock, delta neutral).
We continue to see unusual activity in the options of Electronic Data Systems (EDS, 27.95, +0.90%) and overall it appears that investors are speculating on notable near term move to the upside. Today there are opening buyers of ~7,500 April 27.5 (.65d) calls and in separate trading there are also buyers of the May 27.5 calls and June 30 calls. Last week we saw opening buyers of the May 30 calls and sellers of the January09 30 calls.
We continued to see bearish trading in Popular Inc (BPOP, 15.78, -1.44%) as investors have accumulated 5,000 May 15 (.30d) puts over the last two session (2k today). Several weeks ago we also saw buyers of the May 17.5 puts. The trading comes ahead of next week’s earnings on 4/18/07.
In Countrywide Financial (CFC, 33.72, +1.0%) opening investors bought roughly 4,500 May 32.5 and 35 puts today in addition to the July 32.5 and 35 puts, 5,000 times each. We saw similar bearish trading in April, May and July yesterday also.
Options in Penn National Gaming Inc. (PENN, 49.51, +3.08%) were unusually active this morning as investors bought calls and sold puts in the April and May maturities. The activity began when opening investors bought 5,000 May 50 (.41d) calls paying up to $1.55. Not long after, with the stock trending up roughly 3%, opening investors bought 1,000 April 50 (.43d) calls and sold 3,700 April 45 (.07d) puts. These investors indicate a bullish sentiment and are speculating on further upside movement in the near-term. PENN is expected to release earnings on 4/26/07.
In Trump Entertainment Resorts Inc. (TRMP, 17.02, +0.71%) opening investors sold 2,000 May 17.5 (.46d) calls at $0.70. These investors are positioning for decreased levels of volatility and/or limited upside movement in the stock between now and May expiration. TRMP is estimated to release Q1 earnings on 4/30/07. Consensus 1Q estimates are EPS of ($0.25) on revenue of $238.8 mln. On 3/12, TRMP announced that it hired MER to assist in the identification and evaluation of strategic corporate options including, but not limited to, capital structure, financing and value-creation alternatives.
In Palm Inc (PALM, 17.03, +1.3%) today we are seeing April and May 17.5 call buyers as well as volatility buyers in August, and in short the option flow looks bullish. Collectively, the April and May calls traded ~4,500 times today, paying up to $0.30 and $1.05, respectively. Yesterday, investors also bought 2,000 May 17.5 calls also. Additionally this morning, participants bought volatility through 10,000 August 15p/17.5c strangles, paying $2.25 vs. stock delta neural. These investors will win to the option position if the stock trades above $19.75 or below $12.75 between now and when the options expire (8/18/07).
In Boston Scientific Corp. (BSX, 15.34, +0.26%) opening investors enacted a large trade where they bought approximately 16,000 August 17.5 (.32d) calls paying up to $0.60. In buying upside volatility, these investors could be speculating on an upside move beyond the $18.10 level (17.5 strike + 0.60 premium) between now and August expiration.
Retail – Discount
In Wal-Mart Stores Inc (WMT, 47.39, +0.25%) opening investors sold 20,000 May 47.5 (.50d) calls from $1.00 down to $0.95. While getting short volatility, they are likely anticipating limited upside movement over the next months. Additionally, the trading shows a comfort level of selling shares at $48.50 (47.5 strike + $1 premium) should they be assigned on their short calls. WMT reported March same store sales this morning that increased 4.0% vs. 1.6% consensus. Wal-Mart comps were 3.4% vs. 1.4% est. and Sam’s Club comps were 7.4% vs. 3.4% est. The company expects comparable sales during April to be 0.0%-(2.0%). WMT noted that its EPS guidance of $0.68-$0.71 is still attainable but given the tough sales environment in April, it will be a challenge. Consensus is $0.69.
Retail - Restaurants
In Starbucks Corp (SBUX, 30.49, -0.78%) opening investors bought ~20,000 May 30 (.40d) puts this paying up to $0.85. It is possible that they could be buying these puts to protect long stock positions or speculate on a downside move. In either case, the trading suggests expectations for increased volatility heading into earnings on 5/3/07.
There is bearish order flow in the options of Salesforce.com Inc (CRM, 42.67, -2.67%) today amidst weakness in the stock. Specifically, investors bought 1,000 April 45 (.70d) puts, 1,000 May 40 (.30d) puts and 500 May 50 (.90d) puts. The trading comes ahead of Q1 earnings estimated for 5/17/07.
In both United States Steel (X, 104.14, +1.3%) and Nucor (NUE, 66.68, +0.2%) an opening investor bought May .35d puts amidst sector strength. In X, the May 100 puts traded 6,500 times and in NUE investors bought 10,000 May 65 puts. Owning May volatility gives the investor exposure to the next earnings release and the puts give protection again near-term weakness. This morning, following a report that Russia’s Evraz Group could make a takeover bid, steel producer IPS announced that they’ve had discussions which could lead to the sale of the company. The company provided very little information and noted that there could be no assurances that a deal would be completed.
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