Intra-Day Significant Options Activity
ETF / Indices Mentioned: XLI
Stocks Mentioned: ALKS, BVN, CAT, PDLI, LJPC, LXK, MNTA, RX, SNY, TEVA
ETF / Indices
In the Industrial Select SPDR (XLI, 36.28, -0.2%) opening investors bought 5,500 May 35 (.36d) puts for $0.40. The position gives the investor exposure to increased volatility while protecting long equity positions. The biggest component in the XLI is GE, followed by UPS, BA, UTX, TYC, MMM, CAT et al.
In PDL BioPharma (PDLI, 24.16, -0.25%) we are seeing call buyers in both April and May in what is likely speculatively bullish trading. Specifically, investors bought ~2,500 May 25 (.50d) calls and we also saw buyers of the April 25 (.40d) calls in smaller size.
Pharma & Generic Drugs
MNTA and TEVA are both developing their own generic versions of SNY’s Lovenox. MNTA anticipates the FDA issuing an approval decision on Enoxaparin by the end of 3Q07. A decision regarding TEVA’s application for generic version of Lovenox could come from the FDA at anytime. Also, recall that on 2/9/07 SNY announced that the U.S. District Court for the Central District of California has ruled against SNY in its patent infringement suit against TEVA and Amphastar. According to the verdict, SNY has engaged in inequitable conduct, which could serve to substantially diminish or invalidate the Lovenox patent that expires in 2012. SNY is appealing the ruling.
In Teva Pharmaceutical (TEVA, 37.10, +0.4%) investors sold 4,000 April 35 (1.00d) calls (closing) to buy 8,000 June 37.5 (.51d) calls (opening), paying $0.70. Extending their April position to a higher strike in June implies they expect increased volatility, likely resulting in a notable upside move before June expiration (6/16/07).
In Momenta Pharmaceutical (MNTA, 15.25, +1.1%) there have been steady buyers of volatility (multiple months and various deltas) for the past several weeks suggesting stock-moving news is anticipated. In the past two days for example, investors bought April 7.5, 10 and 15 calls, 3,000 times collectively. Additionally participants bought 2,000 May 15 puts, 800 June 12.5 puts and 300 June 15 calls.
Over the last three days we have seen consistently bearish order flow in Sanofi-Aventis (SNY, 46.08, -0.2%) with both buyers of puts and sellers of calls. Today investors bought ~1,300 May 45 (.33d) puts while yesterday we saw buyers of these and the April 45 puts. The SNY trading contrasts with the bullish order flow we have seen in large cap stocks such as BMY, WYE, LLY, JNJ and PFE.
Computers – Printing Products
We are seeing increased options activity in Lexmark International Inc (LXK, 59.27, -0.4%) ahead of their earnings release coming up on 4/24. Opening investors bought ~4,000 May 65 (.23d) calls paying up to $0.80. While it is possible they could be using the calls to hedge short stock positions, they could also be looking for a notable upside move. LXK calls typically trade under a 1,000 contracts a session.
Gold & Mining
With earnings coming up in Compania De Minas Buenaventura SA (BVN, 33.99, +3.5%) on 4/26/07 we are seeing upside order flow in the options. Opening investors bought 1,300 May 35 (.45d) calls paying from $1.00 up to $1.15. BVN calls typically trade lss than 300 contracts a day.
Ahead of Friday’s earnings in Caterpillar Inc (CAT, 67.53, +0.9%) we are seeing bullish order flow. This morning, investors bought ~2,000 April 67.5 (.50d) calls and ~3,000 May 67.5 (.53d) calls. In the past four weeks, CAT is up 5.5% versus DE which is down 1.8%.
Medical Information Systems
In IMS Health Inc (RX, 29.67, -0.6% ) investors bought August 30 puts versus selling January08 25 puts, as a package 4,000 times opening in both months. They are getting long downside volatility in August and short January08 volatility, implying they are looking for increased movement ahead of August expiration (8/18/07). Q1 earnings are after market tomorrow.
In Alkermes Inc (ALKS, 16.65, -0.06%) there is bullish order flow today following recent strength in the stock indicating that marketplace is looking for further upside over the next month. Specifically, opening investors bought ~2,000 May 17.5 (.45d) calls. Since yesterday, the stock has risen ~9%.
Listed options in La Jolla Pharmaceutical (LJPC, 7.02, -3.04%) do not trade that often but this morning opening investors sold 2,000 September 5 (.20d) puts collecting $0.70. Likely looking for limited downside movement in the stock, the trading indicates they are comfortable buying stock at $4.30 (5 strike - $0.70) should they be assigned on their short put position.
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