IB Options Brief: Baidu, Inc. (BIDU) & MetroPCS Communications, Inc. (PCS)
Baudi Options Abuzz On Reports Of Agreement With Facebook
BIDU ñ Baidu, Inc.
Frenzied options trading ensued at Baudi today on reports the owner of Chinaís most-used search engine signed an agreement with Facebook Inc. to set up a social networking website in China. BIDUís shares rallied nearly 5.0% at the start of the session to touch an intraday- and new all-time high of $148.92. Investors are favoring call options on the stock, trading more than 2.8 calls for each single put option in play today.
Options expiring this Friday are the most heavily populated in early-afternoon trade, with two-way trading traffic evident at most strikes. Volume is heaviest at the April $150 strike, with more than 15,740 calls having changed hands there as of 12:40pm on previously existing open interest of 5,441 contracts.
Call volume is substantial at the in-the-money April $145 and April $155 strikes today, as well. Investors have traded upwards of 11,100 calls at each of those strikes this afternoon. Options expiring in May are active, and provide traders the opportunity to take positions on the stock in advance of the companyís first-quarter earnings report on April 27, 2011.
Medium-term optimists scooped up call options at sky-high strikes in anticipation of continued bullish movement in Baiduís shares through June expiration. Investors picked up more than 1,100 calls as high as the June $190 strike for an average premium of $0.95 a-pop. Call buyers at this strike make money if shares in BIDU spike 28.2% higher in the next couple of months to top the average breakeven price of $190.95 by expiration day in June.
Options implied volatility on the Chinese company increased 11.2% to 47.03% as of 1:00pm in New York, with overall options volume on the stock exceeding 99,930 contracts.
PCS ñ MetroPCS Communications, Inc.
The wireless communications provider popped up on our scanners in the first hour of the trading week after one strategist booked profits on a previously established bullish position in May contract call options. The same player also extended bullish sentiment on MetroPCS, positioning for the price of the underlying to continue to rise ahead of expiration next month. Shares in PCS increased 2.0% in the first half of the session to touch an intraday- and nearly 2-year high of $17.00.
It looks like the trader originally purchased at least 4,500 calls at the May $15 strike for a premium of $1.05 each one month ago, on March 11, when shares in PCS were hovering around $14.87. The sharp rally in the price of PCS shares in the past four weeks lifted premium on the now deep in-the-money calls, allowing the investor to sell the calls today for a premium of $2.00 apiece. Net profits on the sale of the call options amounts to $0.95 per contract.
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Next, the trader extended optimism on the wireless communications company, buying a minimum of 4,500 calls up at the May $17 strike for an average premium of $0.78 a-pop. The investor starts making money on the fresh bullish stance if shares in MetroPCS rally another 4.6% to surpass the average breakeven price of $17.78 by expiration in May. The company is scheduled to report first-quarter earnings ahead of the open on May 3, 2011.
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