Options Intelligence Report: iShares Nasdaq Biotechnology Index Fund (IBB) & Las Vegas Sands Corp. (LVS)
iShares Nasdaq Biotech Index Fund Receives Bearish Bet By Options Combo Player
IBB ñ iShares Nasdaq Biotechnology Index Fund
A three-legged bearish options combination play on the IBB, an exchange-traded fund that mirrors the price and yield performance of the NASDAQ Biotechnology Index, suggests one investor expects shares of the underlying fund to erode ahead of May expiration. Shares are currently down 0.15% on the day to stand at $91.90. The pessimistic options player sold 3,500 call options at the May $95 strike for a premium of $0.60 per contract in order to partially offset the cost of buying a debit put spread. The trader purchased 3,500 puts at the May $90 strike for an average premium of $1.49 each, spread against the sale of 3,500 puts at the lower May $85 strike for $0.50 apiece. Net premium paid for the bearish stance amounts to $0.39 per contract. Thus, the investor is prepared to accrue maximum potential profits of $4.61 per contract if the fundís share price slides 7.5% lower to trade at or beneath $85.00 at expiration day. The short position in call options, while beneficial as a financing tool, poses significant risk of potentially devastating losses to the trader should the IBBís shares suddenly rally above $95.00 in the next month to expiration.
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LVS ñ Las Vegas Sands Corp.
Shares of the owner and operator of the Venetian Resort Hotel and Casino, as well as other resort casino locations, are trading 0.60% lower as of 12:20 pm (ET) to stand at $24.08. Despite the slightly lower share price, investors initiated bullish stances on the stock to prepare for continued share price appreciation going forward. Las Vegas Sandsí shares have experienced a terrific run up recently, rallying a whopping 65% from an intraday low of $14.88 on February 5, 2010, up to yesterdayís new 52-week high of $24.66. The casino operatorís shares are up 490% since touching down to a 52-week low of $4.18 back on April 21, 2009. Bullish players hoping to see shares continue higher picked up 4,100 calls at the May $30 strike for an average premium of $0.40 apiece today. Investors holding the call options make money only if LVS shares surge another 23% from the stockís 52-week high of $24.66 to exceed the average breakeven point to the upside at $30.40 by May expiration day. We note that shares of Las Vegas Sands Corp. last traded above $30.40 back on October 1, 2008, when shares traded up to an intraday high of $37.00.
Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained fromthe use of this information. Past performance is not necessarilyindicative of future results.
This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this materialare not suitable for all investors. Any opinions expressed herein aregiven in good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take intoaccount your particular investment objectives, financial situations orneeds and is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particularcircumstances and, as necessary, seek professional advice.
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