Intra-Day Significant Options Activity
Stocks Mentioned: AF, ARO, COGN, CREE, DLTR, GM, LTD, NOK, RCL, WBSN
Automotive
In General Motors (GM, 31.86, -0.38%) there are opening buyers of 30,000 June 30 (.65d) calls in the market today paying up to $3.60. About two weeks ago we saw aggressive June volatility buyers in both June 30 calls and June 25 puts. Overall, today's options activity does appear bullish.
Cruise Lines
In Royal Caribbean Cruises Inc (RCL, 42.89%) opening investors bought 2,300 June 40 (.28d) puts paying $1.15. Today's downside put buying is most likely to protect long stock positions over the next couple months. In the past month we have highlighted out-of-the-money put buying, predominantly in the 35 strike, across the board ahead of recent earnings in peer Carnival Corp (CCL). RCL is estimated to report earnings on 4/23/07.
Financial – Savings and Loan
Options in the Astoria Financial Corp (AF, 27.19, -0.70%) seldom trade but today opening investors bought 1,000 May 30 (.20d) calls paying from $0.20 up to $0.40. While it is possible they could be using the calls to hedge short stock, they could also be speculating on a notable upside move.
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In Aeropostale Inc. (ARO, 40.68, -0.71%) opening investors sold nearly 1,500 May 45 (.27d) calls at $0.725, which equates to roughly four times the average daily call volume. These investors profit in the event of decreased levels of volatility and/or limited upside movement, and are likely selling the calls against long underlying positions (over-writing).
In Limited Brands Inc (LTD, 26.56, -0.64%) opening investors bought 2,000 January 08 25 (.67d) calls from $4.00 up to $4.20 this morning. These call buyers likely have a longer term bullish directional bias. Recall that about two weeks ago we highlighted a large trade where investors bought 50,000 May 20 calls versus stock on a 1-1 basis.
Retail - Discount
In Dollar Tree Stores Inc. (DLTR, 37.87, -0.89%) opening investors sold approximately 1,800 May 40 (.33d) calls at $0.65. In comparison, DLTR typically trades on average less than 500 contracts a session. These participants are likely selling these calls against long stock (over-writing), which implies they are positioning for limited upside movement and/or a decrease in implied volatility. DLTR is estimated to report Q1 earnings on 5/21/07, which falls after May expiration.
Semiconductors
In CREE Inc. (CREE, 16.66, -1.13%) opening investors bought 1,000 May 17.5 (.60d) puts for $1.45. These in-the-money put buyers appear to be positioning for a downside move in the stock heading into May expiration (5/19/07). CREE is expected to release Q3 earnings on 4/1907.
Software
With Cognos Inc. (COGN, 39.80, 1.73%) trading around $39.50, opening investors entered the market to sell nearly 6,500 August 40 (.57d) calls at $3.50 to $3.40. With COGN currently trading below the strike price, these call sellers are likely speculating on weakness in the stock. Holding all other variables constant, for every $1.00 move in underlying stock price, these options decrease/increase $0.57.
Trading in Websense Inc. (WBSN, 23.12, -1.37%) took on a bearish tone this morning as opening investors bought 2,000 May 25 (.67d) puts paying $2.05 to $2.10, versus a 21-day average daily volume of fewer than 200 contracts a session. In buying these in-the-money puts, these participants are positioning for downside movement between now and May expiration (5/19/07); possibly in reaction to Q1 earnings estimated for 4/27/07.
Wireless
In Nokia Corp (NOK, 22.76, -0.91%) there is somewhat cautious trading in the options today as investors have bought 12,000 April 22.5 (.42d) puts paying $0.60. Buying near term downside volatility, they are likely looking to protect long stock positions over the next couple weeks. Additionally, while options in Qualcomm Inc (QCOM) are quiet today, we have recently highlighted a lot of near term bullish volatility buying in the stock. NOK is scheduled to report earnings on April 19. We also note that April 9 marks the expiration of NOK's license agreement with QCOM. QCOM has indicated that it does not expect to reach a resolution be the April 9th deadline.
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About Susquehanna Financial Group
Susquehanna Financial Group is an affiliate of Susquehanna International Group (SIG). SIG has evolved over the past twenty years into a leading financial institution focusing on trading, investment banking, private equity, venture capital, institutional sales and research. SIG makes markets in more than 6,000 stocks, is among the nation's largest option market makers, is the leading sector index options trading firm and is one of the largest liquidity providers in ETFs. SIG has more than 12 offices across North America, Europe and Asia.
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