Options Intelligence Report: Conseco, Inc. (CNO), OSI Pharmaceuticals, Inc. (OSIP) & Hartford Financial Services Group, Inc. (HIG)
Optimistic Individual Initiates Mammoth Bullish Risk Reversal Play On Conseco
CNO ñ Conseco, Inc.
The holding company for a number of insurance companies, such as Colonial Penn Life Insurance Co. and Washington National Insurance Co., popped up on our ëmost active by options volumeí market scanner late in the session after a massive bullish risk reversal was established on the stock in the January 2011 contract. Consecoís shares declined 0.80% during the course of the trading day to stand at $6.18.
It looks like one optimistic options player sold 33,727 puts at the January 2011 $5.0 strike for a premium of $0.50 apiece in order to partially finance the purchase of 33,727 calls at the same strike for $1.80 each. The net cost of the transaction amounts to $1.30 per contract. Thus, the investor responsible for the reversal is prepared to amass profits if Consecoís shares rally through the breakeven price of $6.30 ahead of expiration day in January. The 67,454 contracts involved in the spread trump existing open interest on the stock of 48,756 lots.
OSIP ñ OSI Pharmaceuticals, Inc.
The outline of a slightly lopsided iron condor appeared in the May contract on OSI Pharmaceuticals, indicating one options investor expects shares of the biotechnology company to trade within a specified range through expiration. OSIPís shares surrendered 0.85% during afternoon trading to stand at $59.55 perhaps after The Wall Street Journal reported that Astellas Pharma, Inc. is extending its tender offer for OSI Pharmaceuticals ñ valued at $3.5 billion ñ by three weeks to April 23, 2010.
The investor responsible for the iron condor play essentially enacted two credit spreads, one using put options and the other calls, in order to pocket options premium. On the call side, the trader shed 4,000 contracts at the May $60 strike for a premium of $1.90 apiece, spread against the purchase of the same number of calls at the higher May $62.5 strike for $0.90 each. As for the puts, the investor sold 4,000 lots at the May $55 strike for a premium of $0.94 per contract, marked against the purchase of 4,000 puts at the lower May $50 strike for $0.62 each. Notice that the put credit spread is wider than the spread on the call side, which creates a lopsided iron condor in this case.
The net credit pocketed by the trader amounts to $1.32 per contract and is safe in the investorís piggy bank as long as OSIPís shares trade within the range of $55.00 to $60.00 through expiration. Maximum potential losses are capped at $1.18 should shares of the underlying stock rally through $62.50 ahead of expiration day. However, loss potential is greater to the downside, and maxes out at $3.68 per contract in the event that OSIP-shares plummet through $50.00 by May expiration.
HIG ñ Hartford Financial Services Group, Inc.
The insurerís shares rallied more than 1% this afternoon after Hartford Financial Services Group repurchased preferred shares from the United States government for $3.4 billion in order to end a taxpayer-funded bailout. Bullish options investors reacted by purchasing call options in the April contract to position for continued upward momentum in the price of the underlying shares through expiration.
Traders picked up 1,600 calls at the April $29 strike for an average premium of $0.56 per contract, while the higher April $30 strike had about 3,900 calls coveted by bullish players for an average of $0.28 in premium apiece. Uber-bullish individuals purchased 1,700 call options at the April $31 strike for an average premium of $0.15 each.
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