Intra-Day Significant Options Activity
ETF / Indices Mentioned: EEM, GDX
Stocks Mentioned: AMKR, CCU, DG, FCEL, GM, HRB, ITT, PDLI, TSO
ETF / Indices
In the iShares MSCI Emerging Markets Index (EEM, 115.84, -0.9%) investors bought 5,000 June 120 (.57d) puts paying $8.20. Last Friday, opening investors bought at least 4,000 of these same puts for up to $8.00. The higher delta of the options suggests these investors have a bearish bias.
In the Market Vectors Gold Miners (GDX, 39.70, -1.1%) investors bought 5,000 September 41 straddles for $6.60. Indicating no directional opinion, these investors are positioning for increased levels of volatility. More specifically, this trade becomes profitable in the event stock trades above $47.60 or below $34.40 between now and September expiration.
Amidst an upside move in FuelCell Energy Inc (FCEL, 8.64, +20.0%) there is bullish order flow in the options suggesting today’s strength will continue. Specifically, investors bought 3,500 April 10 (.30d) calls paying up to $0.45. Yesterday, we saw buyers of the April 7.5 calls ahead of today’s upside move. This morning, FCEL announced that the Connecticut Clean Energy Fund has selected six of the company’s projects for purchase by utilities under the state’s initiative to improve power generation. The company noted that under a 2003 state energy act, utilities are required to enter into long-term power agreements with developers to purchase Class I renewable energy. FCEL said the sales value of the projects is more than $200 mln if all the projects are accepted.
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In General Motors Corp (GM, 31.83, -1.3% ) we are seeing bullish buyers of the June 30 (.65d) calls for the second day in a row. Since yesterday, investors have bought approximately 45,000 of the calls (7k today), which is equivalent to buying approximately 2.9mln shares of stock. A couple weeks ago participants bought at least 10,000 of the June 30 calls as well as June 25 puts.
In PDL BioPhama (PDLI, 21.50, +5.4%) opening investors bought over 3,500 May 22.5 calls throughout the morning, paying $0.65 up to $0.90. The participants likely think the stock will be more volatile in the coming weeks and make an upside move over $22.50. The next earnings release is estimated for 5/2/07, which is the May options cycle.
In ITT Corp (ITT, 60.89, -0.5%) we have seen an unusual amount of front month put buying today alongside negative news in the stock. On the day, opening investors bought approximately 2,000 April 60 puts, paying up to $1.55, as well as 500 April 55 puts for $0.15. According to a press release from the US Department of Justice, ITT agreed to pay a $100 mln penalty to the US government and plead guilty to illegally exporting secret military data overseas. The information was related to night vision systems produced by ITT.
Energy – Gas Distribution
With takeover speculation circulating in Southern Union Co. (SUG, 29.84, +0.6%) opening investors bought approximately 1,000 April 30 (.43d) calls paying from $0.35 up to $0.50. SUG typically trades fewer than 200 contracts a session.
Financial – Commercial Services
H and R Block Inc (HRB, 21.23, -1.5%) options are active today with the heaviest volume seen in the April and May options. In April, investors are buying both calls and puts across the 20 and 22.5 strikes. In May, there are call buyers and put buyers in multiple strikes, however the May 17.5 puts are the most active today. Investors are clearly looking for a notable move in the stock, but a directional sentiment is not apparent. On 11/6/06, HRB announced that it was considering strategic alternatives for its Option One subprime mortgage unit. During its 1/9/07 investor meeting, management stated that they have received high quality interest in the unit and expect to sell the unit for $1.3 bln, with a finalized decision expected within the next couple of weeks, and a formal decision before the end of 1Q07.
On 2/22, in addition to reporting earnings that were slightly below consensus estimates, HRB management stated that its ongoing strategic alternatives process for Option One has progressed as planned and expect to know the outcome of this process by the end of March, while also slightly boosting its expected execution price to ‘at least’ $1.3 bln from 1.3 bln previously.
With Clear Channel Communications Inc. (CCU, 35.23, -0.6%) trading at $35.33, opening investors bought approximately 15,000 May 35 (.44d) puts for $0.90. These investors could be protecting long stock positions and/or buying the puts to profit from a downside move. CCU is in a deal to be acquired by Bain Capital and Thomas H Lee Partners for $37.60 cash per share. There is concern that the deal will be voted down at the shareholder meeting on 4/19/07. Fidelity, a 9.7% shareholder, has voiced opposition to the deal and more recently Highfields Capital Management said it would vote its entire 5% stake against the deal. The CCU transaction needs a 2/3 approval vote as opposed to a simple majority.
Options in Tesoro Corp. (TSO, 98.22, -1.3%) remain active as investors this morning sold 5,000 May 100/95 put spreads at $2.30. These investors appear to be rolling their existing long May 100 puts (which were bought last week) down to a lower strike indicating a further cautious stance. In addition to the recent May volatility buying, we have seen trading in April such as last week’s purchase of 2,000 April 105 (.40d) calls. TSO is estimated to report earnings on 5/4/07.
Retail – Discount Stores
With Dollar General (DG, 21.19, +0.2%) trading approximately $21.20, investors bought 15,000 August 20 puts vs. selling 15,000 August 17.5 puts, opening in both strikes. These investors may feel there is increased risk of a downside move in the stock (below $20.00, but limited below $17.50) between now and August expiration (8/18/07). DG was trading $16.78 before the takeover was announced on 3/12/07. On 3/26 BMO, DG reported 4Q EPS of $0.16, including items, vs. $0.36 consensus. On 3/12, DG announced that it had entered a deal to be acquired by KKR for $22.00/share in cash. The transaction is expected to close in 3Q08.
Semi – Electronic Components
In Amkor Technology Inc (AMKR, 12.84, -1.1%) we are seeing buyers of April and May 12.5 puts this morning. Specifically, in separate trading investors bought 2,000 April 12.5 (.38d) puts and 2,000 May 12.5 (.40d) puts. The put buying implies a bearish sentiment heading into their Q1 earnings release currently estimated for 4/23/07.
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