IB Options Brief: Verizon Communications, Inc. (VZ) & NASDAQ OMX Group, Inc. (NDAQ)
Bulls Devour Verizon Communications Call Options
VZ ñ Verizon Communications, Inc.
Bulls are dominating activity in options on Verizon today with the price of the underlying stock rising as much as 1.15% to secure yet another new 52-week high of $36.85 this afternoon. Investors scooped up call options across several expiries during the session thus far, trading more than 2.9 calls on the stock for each single put option in play today.
Traders expecting Verizon to continue to hit new highs ahead of January expiration day bought more than 1,600 calls at the January $37 strike for an average premium of $0.30 each. Another 1,150 calls were picked up at the higher January $38 strike at an average premium of $0.13 apiece. Investors holding these contracts are prepared to make money should Verizonís shares increase another 3.5% to surpass the average breakeven price to the upside at $38.13 by January expiration. Traders long the closer-to-the-money January $37 strike calls are hoping to see shares rise 1.2% to trade above $37.30 by expiration day this month.
Bullish sentiment on Verizon Communications spread to the February $37 strike where another 1,200 call options were purchased for an average premium of $0.62 apiece. These calls, which expire on February 18, 2011, will have plenty of life left in them when Verizon reports fourth-quarter results before the market opens on January 25, 2011.
Call buying was also detected at the April $36 strike where some 2,500 in-the-money calls options were coveted for an average premium of $1.45 a-pop. Investors buying the longer-dated contracts are poised to profit should shares in VZ exceed the average breakeven price of $37.45 ahead of expiration day in April. Options implied volatility moved 6.4% higher by 1:45pm to stand at 19.23%.
NDAQ ñ NASDAQ OMX Group, Inc.
The global exchange group popped up on our ëhot by options volumeí market scanner this morning after one strategist initiated a ratio put spread in the March contract. Shares in NASDAQ OMX Group are currently up 0.33% to stand at $24.19 as of 11:45am in New York trading. The put player may be utilizing the spread to hedge a long position in the underlying stock, or placing an outright bearish stance on NDAQ because he expects shares to decline in the next couple of months.
The trader picked up 1,950 puts at the March $24 strike for a premium of $1.20 each, and sold 3,900 puts at the lower March $21 strike at a premium of $0.30 apiece. Net premium paid to establish the spread amounts to $0.60 per contract. Thus, the investor is prepared to make money, or realize downside protection, if shares in NDAQ fall 3.3% from the current price of $24.19 to breach the effective breakeven point to the downside at $23.40 ahead of March expiration.
Maximum potential profits of $2.40 per contract are available to the options trader should NDAQís shares plunge 13.2% to settle at $21.00 at expiration day. The ratio of twice as many short put options exposes the investor to losses in the event that shares plummet more than 23.1% to breach the lower breakeven price of $18.60 by expiration in March.
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