Options Intelligence Report: Toyota Motor Corp. ADS (TM) & iShares Silver Trust ETF (SLV)
TM ñ Toyota Motor Corp. ADS
Shares of the worldís largest carmaker continue to suffer declines today following the firmís recall of another 1 million vehicles, which drives the total number to 5.35 million vehicles pulled off the roads in the United States. Toyotaís shares are down about 3.6% to $76.92 as of 12:15 pm (EDT).
Option bears utilized both calls and puts in the February contract, populating the stock with pessimistic signals. Put buyers targeted the February $75 strike where at least 1,300 contracts were picked up for an average premium of $1.62 apiece. Investors long the puts are perhaps expecting Toyotaís shares to fall beneath the breakeven price of $73.38 by expiration day next month.
Other traders shed 1,100 calls at the higher February $80 strike for about $1.98 each. Investors pocket the premium in exchange for bearing the risk that shares rebound ahead of expiration. However, these traders appear more than willing to accept such risk because they doubt current dismal affairs at the automaker will clear up anytime soon. Option implied volatility is up roughly 5.9% to 35.44%.
SLV ñ iShares Silver Trust ETF
Shares of the silver exchange-traded fund, which generally mirrors the price of silver owned by the trust, slipped 1.5% lower today to $16.01. The move lower in the value of the underlying prompted a one investor to establish a bearish risk reversal in the April contract. The transaction suggests the trader is medium-term pessimistic on the SLV.
The reversal play involved the sale of approximately 33,500 in-the-money call options at the April $16 strike for a premium of $1.12 apiece, spread against the purchase of 33,500 puts at the same strike for an average premium of $0.92 each. The trader pockets a net credit of $0.20 per contract on the spread, which he keeps in full as long as SLV shares decline to or below $16.00 by expiration in April. Additional profits accumulate for the investor if shares of the fund trade beneath $16.00.
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