Options Intelligence Report: iShares Dow Jones U.S. Real Estate Index ETF (IYR) & Emulex Corp. (ELX)
IYR ñ iShares Dow Jones U.S. Real Estate Index ETF
A short strangle enacted on the IYR, an exchange-traded fund that tracks the price and yield performance of the Dow Jones U.S. Real Estate Index, indicates one options player expects shares of the underlying fund to trade within a specified range through expiration in May. Shares of the ETF are up 1.3% to $51.65 as of 12:05 pm (ET). The strangle-player sold 5,000 puts at the May $51 strike for a premium of $1.57 apiece in combination with the sale of 5,000 calls at the higher May $52 strike for a premium of $1.25 each. Gross premium pocketed by the investor amounts to $2.82 per contract. The options trader keeps the full premium received on the strangle as long as shares traded within the boundaries of the strike prices described through expiration day. The short position in both calls and puts exposes the investor to losses should shares of the underlying fund rally above the upper breakeven point at $54.82, or if shares slip beneath the lower breakeven price of $48.18, before expiration.
ELX ñ Emulex Corp.
Shares of the provider of network convergence solutions are down 1.40% to $12.72 today following a downgrade to ëholdí from ëbuyí at Canaccord Adams yesterday, where analysts have a 12-month target share price of $14.00 for the telecommunications equipment firm. Bearish investor anticipating continued share price erosion ahead of expiration day next month purchased approximately 3,800 puts at the May $12.5 strike for an average premium of $0.70 apiece. Pessimistic players long the put contracts make money if Emulexís shares slip another 7.25% from the current price to breach the effective breakeven point on the put at $11.80 ahead of expiration day in May. Options implied volatility is slightly up by 3.5% on the stock to 45.81% as of 12:00 pm (ET).
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