Intra-Day Significant Options Activity
Stocks Mentioned: BPOP, BRCD, CC, CY, DELL, LH, SNDA, SUN, TIBX, WFC
Chinese Internet
In Shanda Interactive Entertainment (SNDA, 26.19, +0.15%) opening investors bought 1,500 June 30 (.29d) calls paying up to $0.85. These investors are likely speculating on a move beyond the $30.85 level (30 strike + $0.85 premium) between now and June expiration.
Computers
With Dell Computer Corp. (DELL, 23.14, -1.0%) trending down over 1%, investors entered the market midday and bought 15,000 May 25 (.30d) calls. Earlier this week investors bought at least 5,000 of these calls and we have also recently observed May 22.5 call buyers. Today’s investors appear to be positioning for an upside move in the stock beyond the $25 level.
Financial
In Popular Inc (BPOP, 16.50, unch) opening investors bought 1,500 May 17.5 (.70d) puts paying $1.25 with the stock trading approximately $16.55 at the time of the trade. The higher of delta of these puts implies that the trading is bearish speculation. Q1 earnings are estimated for 4/18/07.
With Wells Fargo (WFC, 34.17, -1.0%) trading approximately $34.53, opening investors bought 10,000 April 35 (.60d) puts for $0.85. These puts have been active recently with additional buyers, both outright and through April 35 / 30 put spreads. Overall, recent trading in the options market implies investors are cautious on the stock for at least the next several months.
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Healthcare – Medical Testing
In Laboratory Corporation of America Holdings (LH, 72.41, -0.5%) opening investors sold 2,400 April 75 (.33d) calls at $0.50. While getting short April volatility, they are likely selling the calls against long stock positions (over-writing). Earnings are currently estimated for 4/23/07 which would fall into the May expiration cycle.
Networking
In Brocade (BRCD, 9.53, -3.3%) opening investors sold approximately 20,000 April 9 (.20d) puts at $0.10. These investors are speculating that the stock will trade in a limited range following today’s weakness in the stock. Additionally, the order indicates the investors are wiling to buy the stock at the $8.90 level in the event the stock declines and they are assigned on their short puts. BRCD hosts a shareholder meeting on 4/19/07 (April option cycle) and earnings are estimated for 5/18/07 (May option cycle).
Oil
With unconfirmed takeover chatter circulating in Sunoco Inc (SUN, 70.31, +0.03%) we saw buyers of near term calls and sellers of longer term volatility. Specifically, investors boguht 70 and 75 strike calls in both and April and May. We also saw sellers of the January09 90 calls on a delta neutral basis.
Retail – Electronics
In Circuit City Stores Inc (CC, 18.56, +0.7%) opening investors bought 3,000 May 17.5 put/20 call strangles paying $1.20. Taking a long volatility position, in terms of stock movement they will win to the trade if CC trades above $21.20 (20 strike + $1.20 premium) or below $16.30 (20 strike - $1.20) between now and May expiration (5/19/07). Earnings are next Wednesday, 4/4/07, and consensus estimates are EPS of $0.63 on revenue of $4.04 bln. Earlier this week, CC announced a restructuring plan that included the separation of approximately 3,400 store associates, exploring strategic alternatives for its InterTAN division, and an agreement with IBM to outsource its IT infrastructure operations. The company also reduced its FY07 sales growth and domestic same store sales growth estimates slightly.
Semi – Electronic Components
In Cypress Semiconductor (CY, 18.51, -1.2%) we have seen primarily bearish option flow this week. In the past two days investors sold approximately 8,500 May 17.5 (.77d) calls, including 3,000 today down to $1.55. This week we have also seen a notable amount of buying in the June 20 and 17.5 strike puts. Earnings are expected 4/19/07 and the company’s annual shareholder meeting is scheduled for May 3. Investors continue to await the company’s decision related to its strategic review of alternatives regarding its 70% stake in SPWR. This issue continues to be a key focus for many investors; however, management stressed in January that a major equity transaction involving CY’s stake in SPWR would not occur until at least June due to a lock-up agreement established as a result of SPWR’s acquisition of PowerLight.
Software
With TIBCO Software Inc. (TIBX, 8.52, -4.6%) trading down roughly 5% following last night’s earnings, opening investors bought 2,500 August 10 (.29d) calls. This is unusual volume given TIBX typically trades fewer than 200 calls a session. In getting long volatility, these investors are possibly speculating on a rebound in the stock between now and August expiration.
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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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