IB Options Brief: HollyFrontier Corp. (HFC) & Hansen Medical, Inc. (HNSN)

Posted June 4th, 2012 by Caitlin Duffy in Unusual Activity

HFC ñ HollyFrontier Corp.
The Dallas, Texas-based producer of gasoline and jet fuel popped up on our most active by options volume market scanner this morning following a flurry of activity in the July expiry calls and puts. Shares in HollyFrontier rallied at the start of the session after the stock was raised to ëBuyí from ëNeutralí at UBS, but those gains were short-lived, with the stock now down 3.3% to stand at $28.70 as of 1:25 p.m. in New York.

The largest trade in HFC options today appears to be a bet that shares in HollyFrontier will settle in a narrow range by July expiration. It looks like one strategist initiated a short strangle, selling 7,665 puts at the July $29.5 strike and selling the same number of calls at the July $30.5 strike, all for a net credit of $3.60 per contract.

The trader keeps the full amount of premium should shares in HFC settle within the $29.50 to $30.50 range implied by the strikes, with losses possible in the event that shares in the name exceed the upper breakeven price of $34.10 or slump below the $25.90 breakeven price on the downside.

HNSN ñ Hansen Medical, Inc.
Shares in the medical equipment maker are bucking the trend today, trading 11.3% higher on the session at $2.57 as of 12:30 p.m. ET. Options traders appear to be picking up in-the-money calls in the front month, perhaps to position for shares in Hansen Medical, Inc. to extend gains in the near term.

More than 1,100 calls have changed hands at the Jun. $2.5 strike, with most of the volume purchased for an average premium of $0.28 apiece. Call buyers may profit at expiration later this month in the event that Hansenís shares rally another 8.2% to surpass the average breakeven price at $2.78.

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