Intra-day Significant Options Activity
Stocks Mentioned: ACS, ACW, BKS, DELL, GLW, HD, LOW, MIR, NT, PDLI, QCOM, RIO
Over the last week in Accuride Corp (ACW, 13.88, +0.73%) opening investors have sold 3,900 August 12.5 (.80d) calls (1,500 trade today). The higher delta of the calls implies that they have a directionally bearish bias over the next several months.
In PDL BioPharma Inc. (PDLI, 19.05, +1.76%) bullish investors bought approximately 2,000 April 17.5 (.72d) calls paying up to $2.10. Just last Monday opening investors bought at least 4,500 of these same options paying up to $2.25. Overall, the higher delta of the options suggests investors are speculating on upside in the stock over the next month.
In Dell Computer Corp. (DELL, 22.49, -0.04%) investors continue to convey a bullish sentiment through buying 22.5 strike options. This morning investors bought nearly 5,000 April 22.5 (.55d) calls paying up to $0.70. On Wednesday of last week, investors bought approximately 6,000 March 22.50 calls (now expired), 10,000 of these same April 22.50 calls, and 4,500 May 22.50/25 call spreads.
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In Affiliated Computer Services (ACS, 51.31, +0.67%) opening investors bought 1,200 May 50 (.65d) calls paying $2.80. While buying volatility, the trading does appear to have a near term bullish bias. Currently, Q3 earnings are estimated for 4/27/07, which would fall into the May expiration cycle. Calls in ACS typically trade under 300 contracts a session.
In Companhia Vale do Rio Doce (RIO, 36.12, +1.86%) investors bought 9,000 January 40 calls versus selling 18,000 January 50 calls as a package, opening in both strikes. In selling the 50 strike calls to finance the purchase of the 40 strike calls, these investors are positioning for upside in the stock, but not above the $50 level.
For the last week in Corning Inc (GLW, 22.38, +2.80%) we have seen consistently bullish order flow and last Friday there were unconfirmed takeover rumors in the market. Today, investors bought 20,000 January08 20/30 call spreads (investors bought 20k of these last week), bought ~5,000 May 22.5 (.53d) calls and bought 6,000 April 22.5 (.52d) calls.
Retail - Bookstore
Options in Barnes & Noble Inc. (BKS, 37.59, +1.40%) typically trade under 800 contracts a session, but this morning investors sold 3,000 October 35p / 45c strangles. The participants sold the options at $2.40, and the trading implies that they believe the stock is likely to remain range bound between $32.60 - $47.40 by October expiration. Additionally, the trading implies these investors have a comfort level of buying stock for $32.60 (strike of 35 - $2.40 of premium) or selling stock at $47.40 (strike of 45 + $2.40 premium). BKS – Shares of BKS fell 11.3% on 3/5 after the company reported 4Q revenue of $1.5 bln vs. $1.84 bln consensus. BKS said FY06 EPS would be in the low to middle range of its previously announced $1.86-$1.96 guidance (current consensus is $1.88). BKS also guided FY07 EPS to $1.65-$1.80 vs. the consensus of $2.42 on revenue of $4.6 bln-$4.7 bln vs. $5.4 bln consensus (comparable estimates as of 3/5). BKS will report 4Q earnings on 3/22.
Retail - Home Improvement
We observed seemingly bullish activity in Home Depot Inc. (HD, 37.53, +0.05%) and Lowe's Companies Inc. (LOW, 31.18, +0.84%) this morning as investors bought front calls in both names simultaneously. More specifically, opening investors in HD have accumulated ~5,500 each of the April (.56d) 37.5 and April (.19d) 40 strike calls. In LOW investors bought upwards of 6,000 April 32.5 (.30d) calls.
In Mirant Corp (MIR, 38.61, +0.81%) seemingly bullish investors bought the September 40/45 call spread versus selling the September 35 puts as a package 20,000 times in opening trading. Today’s upside order flow in the September cycle is notable given recent order flow in the name. At the beginning of this month investors got long the September 35 calls 20,000 times, rolling their long position to September from March. Additionally, we have seen delta neutral buyers of both the September 42.5 calls and the September 27.5 puts.
Opening investors in Nortel Networks (NT, 26.70, -1.26%) sold 20,000 June 25 straddles at $3.85 tied to $26 stock on a delta neutral basis. They are taking a short volatility position implying expectations for decreased movement in the stock over the next several months.
Over the last week in Qualcomm Inc (QCOM, 43.21, -1.08%) we have seen investors generally buying upside volatility in both the April and July expiration cycles. For instance, today investors bought ~25,000 April 45 calls paying $0.85. Additionally today investors sold 10,000 April 42.5/47.5 call spreads possibly rolling their long calls to a higher strike. Last week we saw outright buyers of the April 47.5 calls, buyers of the April 50 calls delta neutral and buyers of the July 50 calls.
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