Options Intelligence Report: Aetna, Inc. (AET) & Exxon Mobil Corp. (XOM)
Aetna Bucks Rising Market As Investor Loads Up With Put Options Combination
AETñ Aetna, Inc.
A large-volume protective put play in the April contract on health benefits company, Aetna, Inc., caught our eye in the first half of the trading session. Aetnaís shares are trading 1.50% lower to $29.50 today and perhaps partly inspired the bearish put spread transacted on the stock. It looks like one investor purchased 20,000 in-the-money puts at the April $30 strike for an average premium of $2.16 apiece, spread against the sale of 20,000 puts at the lower April $20 strike for about $0.55 each. The spread cost the trader a net $1.61 per contract, thus providing downside protection should shares decline beneath the effective breakeven price of $28.39 ahead of April expiration. We note that the size of the transaction suggests the investor responsible for the trade is likely utilizing the spread to insure the value of a long underlying stock position through expiration in three months.
XOM ñ Exxon Mobil Corp.
Shares of the largest company in the United States rallied more than 2.50% today to $66.14 after the Texas-based firm revealed a smaller-than-expected decline in fourth-quarter profits. XOM posted earnings of $1.27 per share in the fourth quarter, which exceeded average analyst estimates by about 8 pennies a share. Bullish options activity on Exxon Mobil in the January 2011 contract today seems to be a repeat performance of long-term optimistic trading we observed recently. A bull call spread was purchased by an investor positioning for a move up in XOMís share price by expiration next January. The trader picked up 14,500 calls at the now in-the-money January 2011 $65 strike for a premium of $6.15 each, marked against the sale of 14,500 calls at the higher January 2011 $75 strike for approximately $2.35 apiece. The net cost of the spread amounts to $3.80 per contract. Maximum potential profits of $6.20 per contract accumulate for the trader if Exxon Mobilís share price increases 13.40% over the current value to $75.00 by expiration day. Option implied volatility on the stock is down roughly 9% to 20.98% following earnings.
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