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Options Update: State Street Corp. (STT) & Pfizer, Inc. (PFE)

STT – State Street Corp.

Bullish options activity in the December contract on the financial holding company suggests one investor expects shares to improve significantly by expiration next month. State Street’s shares rallied about 1% today to $41.01. Optimism on STT took the form of a plain-vanilla call spread. The transaction involved the purchase of 10,000 calls at the December 46 strike for 98 cents each, spread against the sale of the same number of calls at the higher December 50 strike for 28 cents apiece.

The net cost of the bullish play amounts to 70 cents per contract and yields maximum potential profits of 3.30 if the stock jumps to $50.00 by expiration. Shares must rise at least 14% from the current price in order for the investor to breakeven at $46.70. A rally of 22% ensures the trader banks maximum profits of 3.30 per contract for a total of $3.3 million. We note that shares of STT were trading above $55.00 just a few weeks ago on October 12, 2009.




PFE – Pfizer, Inc.

Global pharmaceutical company, Pfizer, attracted bullish players to the June 2010 contract. Shares rose slightly earlier on in the trading session but are currently trading 0.5% lower to stand at $16.87 by midday. Investors expecting shares to improve by expiration in June initiated plain-vanilla call buying tactics.

Traders scooped up approximately 10,500 calls at the June 20 strike for an average premium of 56 cents apiece. Call-buyers will accrue profits by expiration if shares of PFE rally 22% to breach the breakeven point at $20.56. Pfizer’s shares last traded above $20.00 back on May 19, 2008.

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