Symantec Corp. (SYMC: 14.98 +0.26 +1.77%) - A sizeable delta neutral transaction on the provider of security, storage and systems management solutions indicates one options strategist is cautiously optimistic that Symantec’s shares are on the up-and-up. SYMC’s shares rallied 1.90% during the session to stand at $15.00 as of 3:40 pm (ET). The bullish trader appears to have established a delta neutral put and stock trade, buying 26,500 puts at the October $15 strike for an average premium of $0.98 apiece using a .46 delta, and tied to $14.96 stock. Time and sales on SYMC reveals one massive purchase of approximately 1.25 million shares of the underlying for a volume-weighted average price of $14.96 at roughly the same time the puts were transacted. This type of trading strategy suggests the investor, who is now long the stock, is expecting shares to rally ahead of October expiration. The put options serve as an insurance policy for the trader in case shares fail to perform as he expects they will in the next several months to expiration.
Hospira Inc. (HSP: 58.90 +0.67 +1.15%) - The specialty pharmaceutical firm appeared on our ‘hot by options volume’ market scanner in afternoon trading after one options investor purchased a long strangle in the August contract. Hospira’s shares are up 1.25% to arrive at $58.96 just minutes before the closing bell. The strangle-strategist purchased 1,350 calls at the August $65 strike for a premium of $0.30 each and picked up the same number of puts at the lower August $55 strike for a premium of $0.80 apiece. The net cost of the transaction amounts to $1.10 per contract. The nature of the long strangle indicates the responsible party expects a dramatic shift in the price of the underlying shares by August expiration. Perhaps the trader is eyeing the company’s upcoming second-quarter earnings report scheduled for July 28, 2010, and thusly positioning for a big shift in share price following those results. Regardless of the motivation behind the trade, the investor is prepared to profit should Hospira’s shares rally 12.1% over the current price to surpass the upper breakeven point on the trade at $66.10, or if HSP’s shares plummet 8.6% to breach the lower breakeven price of $53.90, ahead of August expiration day. The strangler may also benefit from increases in premium on the options, which typically accompany large upward shifts in the overall reading of options implied volatility on the stock. We note Hospira’s shares haven’t come close to reaching $66.10 in the past 5 years, but have traded as low as $36.58 in the past 52-weeks. Shares breached the lower breakeven price of $53.90 as recently as June 11, 2010.
Ethan Allen Interiors, Inc. (ETH: 14.76 +1.06 +7.74%) - Shares of the manufacturer and retailer of home furnishings and accessories are trading just under 8.5% higher on the day to arrive at $14.86 as of 12:45 pm (ET). One long-term bullish investor targeted the November contract call options in order to position for continued appreciation in the price of the underlying stock. The options strategist initiated a plain-vanilla call spread, buying 1,000 deep in-the-money calls at the November $12.5 strike for a premium of $3.40 apiece, and selling the same number of calls at the higher November $17.5 strike for a premium of $0.80 each. The net cost of the transaction amounts to $2.60 per contract. Thus, the optimistic individual stands ready to profit should Ethan Allen’s shares increase another 1.6% to surpass the effective breakeven point on the spread at $15.10 by November expiration day. The investor walks away with maximum potential profits of $2.40 per contract if the furniture maker’s shares rally 17.75% over the current price of $14.86 to exceed $17.50 by expiration. Options implied volatility on Ethan Allen plunged 11.7% to 58.61% by 12:50 pm (ET).
Continental Airlines, Inc. (CAL: 24.04 +1.04 +4.52%) - Bullish options strategists initiated a couple of put credit spreads on Continental Airlines today with shares of the U.S. air carrier flying 4.35% higher to $24.00 as of 12:30 pm (ET). Investors populating CAL options are forecasting clear skies for the firm through September expiration and expect the price of the underlying shares to remain at least above $20.00 for the next few months. One of the bullish spreads involved the sale of 5,000 puts at the August $20 strike for a premium of $0.56 apiece, marked against the purchase of the same number of puts at the lower August $18 strike for a premium of $0.32 each. The investor responsible for the transaction pockets a net credit of $0.24 per contract, and keeps the full amount received today as long as CAL’s shares exceed $20.00 through expiration day next month. The trader receives the $0.24 credit in exchange for bearing the risk that shares crash and burn ahead of expiration. Losses on the position start to accumulate if Continental Airlines’ shares plunge 17.66% from the current price of $24.00 to breach the effective breakeven point to the downside at $19.76. The investor is slammed with maximum potential losses of $1.76 per contract should shares plummet 25% to trade below $18.00 ahead of expiration in August. An identical 5,000-lot put credit spread was established in the September contract. This transaction yields a net credit of $0.35 per contract to the responsible party if shares remain above $20.00, and results in maximum potential losses of $1.65 per contract if CAL’s shares slip beneath $18.00 by expiration day in September.
RadioShack Corp. (RSH: 22.41 +0.89 +4.14%) - Call options on the retailer of consumer electronics goods and services are flying off the shelves this morning with RadioShack’s shares trading 3.95% higher on the day to stand at $22.37 as of 11:15 am (ET). Earlier in the session RSH shares rallied more than 7.6% to secure an intraday high of $23.16. Bullish options investors expecting continued appreciation in the price of the underlying stock this week picked up approximately 2,200 calls at the July $22.5 strike for an average premium of $0.60 apiece. Call buyers at this strike stand ready to amass profits should the retailer’s shares exceed the average breakeven price of $23.10 by expiration on Friday. Traders anticipating a more dramatic upward move in share price purchased 1,700 calls at the higher July $24 strike for an average premium of $0.37 a-pop. RadioShack’s shares must increase at least 8.94% over the current price of $22.37 and surpass the stock’s current 52-week high of $24.00 in order for investors long the July $24 strike calls to make money above the effective breakeven point to the upside at $24.37 by July expiration. Optimists also scooped up at least 1,000 calls at the August $25 strike for an average premium of $0.67 each. Investors long the call options are poised to profit should RadioShack’s shares surge 14.75% to trade above the average breakeven price of $25.67 by August expiration day.
Flextronics International, Ltd. (NASDAQ:FLEX) - The provider of electronics manufacturing services to original equipment manufacturers of a range of products in a variety of industries popped up on our ‘hot by options volume’ market scanner in the first half of the trading session due to frenzied call buying activity in the January 2011 contract. Flextronics’ shares are currently up more than 4.7% to arrive at $6.44 by 11:30 am (ET). Shares are up sharply one day after the firm was rated new ‘buy’ with a 12-month target share price of $9.00 at Stifel Nicolaus, and two trading days after FLEX was rated new ‘overweight’ with a 6-month target share price of $7.00 at JPMorgan. Long-term bullish traders positioning for Flextronics’ shares to appreciate significantly by expiration in January 2011 scooped up approximately 6,500 calls at the January 2011 $7.5 strike for an average premium of $0.48 per contract. Investors long the calls make money if, by expiration, FLEX’s shares rally more than 23.9% to surpass the average breakeven point at $7.98. The sharp increase in demand for call options on the stock lifted the overall reading of options implied volatility on FLEX 11.6% to 47.39% by 11:40 am (ET).
Archer-Daniels Midland Co. (ADM: 26.98 +0.30 +1.12%) - Shares of one of the world’s largest processors of oilseeds, corn, wheat, cocoa and other feedstuffs are up 1.7% to stand at $27.14 as of 11:45 am (ET) after earlier rallying more than 2.1% to touch an intraday high of $27.25. Investors itching for continued bullish movement in the price of the underlying stock purchased call options on the vegetable oil manufacturer this morning. Traders picked up approximately 4,400 calls at the now in-the-money September $27 strike for an average premium of $1.24 apiece. Call buyers make money as long as Archer Daniels’ shares rally 4.05% over the current price of $27.14 and trade above the average breakeven point on the calls at $28.24 ahead of expiration day in September.
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