Options Update: (XLU) SPDR Utilities Select Sector ETF, American Electric Power Company, Inc. (AEP) & CIGNA Corp. (CI)

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XLU ñ SPDR Utilities Select Sector ETF ñ Shares of the exchange-traded fund comprised of common stocks of companies from the electric utilities, multi-utilities, independent power producers, energy traders and gas utility industries, increased 0.75% during the trading day to a new 52-week high of $32.08. The fresh high for the fund perhaps inspired the bullish options activity we observed on the XLU today. One investor banked profits on a previously established long call position in the January 2010 contract. The trader originally bought 5,000 calls at the January 29 strike for a premium of 92 cents apiece back on November 6, 2009, when shares were at $28.90. The investor sold the calls today for 2.95 apiece and took in net profits of 2.03 per contract. It seems the same trader extended optimism on the XLU to the March 31 strike where another chunk of 5,000 calls were scooped up for an average premium of 1.53 each. Additional profits amass if shares of the fund rally through the breakeven point at $32.53 by expiration day in March.

AEP ñ American Electric Power Company, Inc. ñ Shares of the energy company reached a new 52-week high of $36.01 in morning trading, but slipped 0.5% beneath Fridayís closing value to $35.40, as of 2:20 pm (EDT). Investors placed bullish bets on the stock by initiating plain-vanilla call buying activity on the stock. Approximately 10,000 calls were purchased at the December 36 strike for an average premium of 30 cents apiece. Traders long the calls profit if shares surpass the breakeven price of $36.30 before the options expire on Friday. Optimism spread to the higher January 37 strike where about 1,200 calls were picked up for 47 cents premium per contract. Shares of AEP must rally 6% over the current price for call-buyers to breakeven at $37.47 by Januaryís expiration day.




CI ñ CIGNA Corp. ñ The health care and related benefits company attracted near-term option bulls today with shares up more than 2% to a new 52-week high of $36.24. One trader banked significant profits by unraveling a previously established long call position in the December contract. It appears the investor originally purchased 5,000 calls at the December 33 strike for 1.25 apiece back on December 9, 2009, when shares of CI were at $34.04. Today the trader enjoyed net profits of 1.80 per contract by selling the calls for 3.05 apiece. Next, it looks like the CI-bull extended bullish sentiment to the January contract by purchasing a call spread. The January 37 strike had 5,000 calls purchased for 1.55 apiece, spread against the sale of the same number of calls at the higher January 40 strike for 49 cents premium each. The net cost of the spread amounts to 1.06 per contract and yields maximum potential profits of 1.94 apiece if CIís shares rally up to $40.00 by expiration next month. Option implied volatility on the stock jumped 5% to an intraday high of 42.53%.

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