Options Update: Financial Select Sector SPDR ETF (XLF) & Corning, Inc. (GLW)
XLF ñ Financial Select Sector SPDR ETF ñ Shares of the financials exchange-traded fund slipped slightly lower in afternoon trading, falling less than 0.50% to $14.40. Options activity in the February contract indicates greater volatility in the price of the underlying through expiration in two months.
One investor purchased a strangle by picking up 10,000 puts at the February 14 strike for 46 cents each, and by purchasing 10,000 calls at the higher February 15 strike for 37 cents premium apiece. The net cost of the strangle amounts to 83 cents per contract. The parameters of the strangle imply the trader expects shares to shift dramatically by expiration. The investor accrues profits if the XLFís shares move above the upper breakeven point at $15.83, or if shares fall below the lower breakeven price of $13.17. Option implied volatility on the fund rose about 4% during the trading session to an intraday high of 26.32%.
GLW ñ Corning, Inc. ñ Shares of the largest maker of glass for liquid-crystal displays are up 0.75% to $19.37 today perhaps after receiving an upgrade to ëbuyí from ëholdí at ThinkEquity. The bullish move in shares of the underlying during the session was matched by an optimistic options strategy initiated in the February 2010 contract.
It appears a bullish risk reversal was initiated through the sale of 8,000 puts at the February 18 strike for an average premium of 48 cents apiece, spread against the purchase of 8,000 calls at the higher February 21 strike for roughly 43 cents each. The investor responsible for the transaction receives an average net credit of 5 cents per contract on the trade. The full 5 cent credit is safe in the traderís piggy bank as long as GLWís shares trade above $18.00 through expiration in two months. Additional profits accumulate if Corningís share price increases about 8.5% to surpass the $21.00-level by expiration day.
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