Options Intelligence Report: Phillips-Van Heusen Corp. (PVH) & Coca-Cola Co. (KO)
Pessimist Tries Three-Legged Spread On For Size At Apparel Firm Phillips-Van Heusen
PVH ñ Phillips-Van Heusen Corp.
The apparel company with a portfolio of brands that includes, among others, Calvin Klein and IZOD popped up on our ëhot by options volumeí market scanner today after one strategist initiated a three-legged bearish transaction in the December contract. PVHís shares are down 3.95% to arrive at $60.00 with 80 minutes remaining in the trading session.
The pessimistic player appears to have partially financed a debit put spread by selling out-of-the-money calls. He sold 1,500 calls at the December $50 strike for a premium of $1.00 each, purchased the same number of puts at the December $60 strike at a premium of $3.50 apiece, and sold 1,500 puts at the lower December $50 strike for premium of $0.80 a-pop. Net premium paid to initiate the transaction amounts to $1.70 per contract.
The investor is poised to profit should the price of the underlying shares fall 2.8% from the current price of $60.00 to breach the effective breakeven point to the downside at $58.30 by expiration day. Maximum potential profits of $8.30 per contract are available to the investor if shares plummet 16.7% lower to trade below $50.00 by December expiration. Phillips-Van Heusen Corp. reveals third-quarter earnings after the closing bell on November 18, 2010.
KO ñ Coca-Cola Co.
Bulls are dominating options trading activity on the worldís largest soft drink maker this afternoon with shares of the Atlanta-based company rallying as much as 0.78% to secure a new 52-week high of $60.47. Coke reported third-quarter earnings before the opening bell this morning and said it expects to repurchase about $2 billion worth of its shares, up from $1.5 billion, by the end of the year. The firmís U.S. sales improved for the second consecutive quarter, net income increased 8.4% and beverage volume in emerging markets grew significantly in the quarter.
Bullish players sold near-term puts and picked up call options on Coca-Cola. Investors sold approximately 1,700 puts at the November $57.5 strike for premium of $0.24 per contract, and shed 1,200 puts at the November $60 strike for an average premium of $0.88 each. Traders hoping to see shares extend gains through expiration day next month picked up 1,700 in-the-money calls at the November $60 strike for premium of $1.03 each. Trading traffic was heaviest in calls at the higher November $62.5 strike where roughly 9,600 contracts were purchased for an average premium of $0.27 a-pop. Investors holding these contracts make money if Coca Colaís shares increase another 3.80% over todayís high of $60.47 to surpass the average breakeven price of $62.77 by November expiration.
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