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Options Update: Ventas, Inc. (VTR) & Wells Fargo & Co. (WFC)

VTR – Ventas, Inc.
Shares of the real estate investment trust edged slightly higher by less than 0.25% to $40.56 during the trading day. An investor expecting shares to appreciate by expiration in December put on a bullish risk reversal strategy. The trader sold 3,000 puts at the December 35 strike for 60 cents premium and simultaneously purchased the same number of calls at the December 45 strike for 60 cents each.

The transaction was initiated at no cost to the investor. Thus, profits are available in the event that shares increase a minimum of 11% to breach the breakeven price of $45.00 by expiration day. The current 52-week high on the stock of $41.46, attained during yesterday’s session, is $3.54 beneath the $45.00-level.

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WFC – Wells Fargo & Co.
A large-volume ratio put spread in the January 2010 contract on Wells Fargo today suggests one investor is bracing for potential share price erosion. Shares are currently flat in late-afternoon trading to stand at $27.60. The bearish transaction is consistent with a number of protective stances observed on individual financial stocks recently, as well as on the Financial Select Sector SPDR ETF (XLF).

The investor responsible for the spread purchased 35,000 puts at the January 26 strike for 1.91 each, and sold twice as many contracts – 70,000 lots – at the lower January 21 strike for an average premium of 67 cents apiece. Selling twice as many lower strike put options reduces the net cost of the protective play to just 57 cents per contract. The puts provide downside protection to the trader should shares of Wells Fargo slip beneath the breakeven point at $25.43 by expiration.

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