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Options Update: Call Buying for Crocs Inc. and Research In Motion Limited

Betting on an earnings rally for a shoemaker,and a long-term bullish position on a smartphone specialist

by Joseph Hargett (jhargett@sir-inc.com) 11/2/2009 1:30 PM

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In light of last week's turmoil on Wall Street, call volume is struggling to outpace put volume in today's trading. Specifically, across all six exchanges, some 4,133,000 calls and 3,772,000 puts have changed hands, resulting in a put/call volume ratio of 0.91. Focusing on the call side of the coin, there are a pair of companies seeing unusually bullish volume despite the recent volatility. First, Research In Motion Limited (RIMM: sentiment, chart, options) has attracted more than 64,000 of these bullish bets, despite a downgrade to "sell" from "buy" at Citigroup. Meanwhile, Crocs Inc. (CROX: sentiment, chart, options) has seen call volume soar to more than eight times the stock's daily average, with some 9,800 contracts changing hands. CROX is slated to release its quarterly earnings report after the close oftrading this Thursday.

Research In Motion Limited

We start our look at today's unusual options activity by drilling down on Research In Motion Limited. Today's call volume has more than doubled the stock's daily average, with traders centering heavily on RIMM's deep out-of-the-money March 100 strike. In fact, the March 100 call (RUL CT) has seen more than 19,000 contracts cross the tape on open interest of 24,529 contracts, hinting that this home to peak March call open interest may increase its lead.

Taking a closer look at this volume, it appears that a majority of the activity is trading at the ask price. The largest block of RIMM March 100 calls traded at 10:03 a.m. Eastern time on the International Securities Exchange (ISE) for the ask price of $0.24, or $24 per contract. Breaking down this position, the trader paid $360,000 for 15,000 contracts -- ($0.24 * 100) * 15,000 = $360,000. Furthermore, in order for this position to reach breakeven, the trader needs RIMM to surge more than 70%, from Friday's close at $58.73, to $100.24 per share. Below is a chart for a visual representation:

Discuss this article:

"Note, RIMM is up about $4 today and his option is up ~20 cents(24 to 43). The RIMM Mar 10 100 option has a delta of .06 --60 cents for a $10 move. Gamma is .007 -- so for a $10 move, delta would be >.13. Hence the first $10 would be yield a gain about 60 cents and the next $10 about $1.30. Hence, my 2x and 4x were actually slightly conservative, not insanely optomistic!"
Respond

"seems to be insanely optimistic."
Respond

"While the P/L graph is correct at expiration, it is a simplistic view. The option purchaser has a lot going for him. Delta is his friend. If RIMM goes up $10, the value of the option will probably double,$20 likely 4x and if RIMM hits 100 a month early, the value of the option will likely be multiple dollars."
Respond

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Options Update: Dell Inc. Short Strangled Ahead of Earnings

(11/19/2009 2:15:00 PM)

After the close of trading tonight, Dell Inc. (DELL: sentiment, chart, options) is expected to report a third-quarter profit of 28 cents per share, down from earnings of 37 cents per share for the same quarter last year. Historically, the company has bested the consensus estimate in each of the prior four reporting periods, with an average upside surprise of 6.1%. Heading into the event, volume on both sides of the put/call coin has nearly quintupled Dell's daily average. Some 16,500 puts and 31,000 calls have changed hands so far today, with traders focusing most of their attention on the December 17 call and the December 15 put.

read more...

Options Update: A Calendar Spread for Chesapeake Energy Corp.

(11/18/2009 3:10:00 PM)

Chesapeake Energy Corp. (CHK: sentiment, chart, options) has drawn considerable put volume today, as the shares follow the rest of the market lower. Specifically, put volume has swelled to nearly four times CHK's daily average, with more than 17,000 of these bearishly oriented contracts changing hands so far, according to data from our Intraday Volume Explosion List. The most popular strike has been CHK's November 24 put, where some 7,800 contracts have changed hands, mostly at the bid, suggesting these contracts were sold.

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Options Update: An Exxon Mobil Synthetic Short

(11/17/2009 1:10:00 PM)

Option activity has been brisk on oil giant Exxon Mobil Corp. (XOM: sentiment, chart, options) today, as traders react to this morning's upgrade at Barclays. Specifically, the brokerage firm lifted XOM to "overweight" from "equal weight," stating that the company can manage organic growth of more than 3% in 2010. Barclays also boosted its price target on XOM to $92 per share from $90 per share.

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Options Update: A Long Call Ladder on Target Corp. Ahead of Earnings

(11/16/2009 2:30:00 PM)

Ahead of the open tomorrow, Target Corp. (TGT: sentiment, chart, options) is slated to release its quarterly earnings report. Currently, the Street is expecting a profit of 50 cents per share out of the retailing giant, down sharply from last year's profit of 79 cents per share for the same quarter. Historically, TGT has topped the consensus estimate twice, missed once, and matched once during the prior four reporting periods. However, following a pair of solid reports in the prior two periods, TGT has logged an average upside surprise of about 10% during the past year.

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Options Update: Short Straddling The Walt Disney Co. Post-Earnings

(11/13/2009 1:30:00 PM)

Shares of The Walt Disney Company (DIS: sentiment, chart, options) have jumped more than 4% after the company reported better-than-expected fourth-quarter earnings. Earnings reports are not only capable of sparking large moves in a security, but they can also be responsible for lifting implied volatility heading into the event. Judging by DIS' options activity in today's trading, it appears that at least one trader is betting on a drop in implieds following the event.

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Options Update: A Short Ratio Put Spread for Ross Stores Inc. Ahead of Earnings

(11/12/2009 2:45:00 PM)

Ross Stores Inc. (ROST: sentiment, chart, options) is scheduled to release its quarterly earnings report ahead of the market open on Nov. 19. Currently, the Street is looking for a profit of 84 cents per share. Technically, ROST has been on fire in 2009, soaring more than 57% along the support of its 10-week and 20-week moving averages. The shares have slipped in recent weeks, however, calling into question the stock's technical staying power.

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Opening View: Rally Fatigue Sets in Despite Wal-Mart and Hewlett-Packard Reports

(11/12/2009 8:00:11 AM)

Despite a strong quarterly earnings report from Wal-Mart Stores Inc. (WMT) and Hewlett-Packard Co.'s (HPQ) buyout offer for 3Com Corp. (COMS), Wall Street appears poised for a negative start to the regular session of trading. At last check, U.S. stock futures on the Dow Jones Industrial Average (DJIA) were down 44 points at 10,215, or about 42 points below fair value. Futures on the S&P 500 Index (SPX) are about 5 points below fair value, and it would appear that the broad-market index is going to struggle with technical resistance in the 1,100 level once again. The SPX's inability to close above this key technical hurdle in yesterday's trading disappointed many technicians, which could be feeding this morning's sour mood.

With stocks losing favor ahead of the open, the U.S. Dollar Index is once again benefiting from a safe-haven bid, gaining 0.21% to 75.23 in pre-market activity. Meanwhile, the December gold futures contract has added $1.40 to $1,116.20 an ounce. Finally, crude oil for January delivery is down 56 cents, at $79.36 per barrel in electronic trading.

Wal-Mart Stores Inc. (WMT) reported that third-quarter earnings rose to $3.24 billion, or 84 cents per share, from $3.14 billion, or 80 cents per share, a year earlier. Sales rose to $99.4 billion from $98.3 billion. Analysts were expecting a profit of 81 cents per share on sales of $99.2 billion. Wal-Mart forecast fourth-quarter profit of $1.08 to $1.12 per share, and raised its full-year outlook to $3.57 to $3.61 per share. Wall Street is currently looking for earnings of $1.12 per share in the fourth quarter and $3.58 per share for the year.

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Options Update: General Electric Co. Bull and Bear Debit Spreads Abound

(11/9/2009 2:35:00 PM)

Options traders appear to be split down the middle when it comes to prospects for General Electric Co. (GE: sentiment, chart, options). For instance, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.00 indicates that put and call open interest is practically dead even among options with less than three months until expiration. Furthermore, GE's SOIR also ranks near the middle of its annual range, underscoring the relatively mixed view among options speculators.

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Options Update: Vertical Call Spread for NVIDIA Corp.

(11/6/2009 1:00:00 PM)

After the close of trading last night, NVIDIA Corp. (NVDA: sentiment, chart, options) reported a third-quarter profit of $107.58 million, or 19 cents per share, compared with a profit of $61.75 million, or 11 cents per share, for the year-earlier period. The company blew past the consensus estimate, and guided higher for the fourth quarter. Following the report, NVDA shares jumped nearly 6% higher in after-hours trading, and the stock has added to this lead in today's trading, advancing nearly 7% before noon.

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Options Update: An Iron Condor for Oracle Corp.

(11/5/2009 1:30:00 PM)

The fact that the company's earnings report is now in the rearview mirror hasn't slowed Oracle Corp. (ORCL: sentiment, chart, options) options traders in the least. Overall, both put and call volume has more than doubled the stock's daily average, with traders centering on a quartet of front-month strikes. Specifically, ORCL was bombarded by heavy activity at its November 20 and 21 puts, with the November 22 and 23 calls also receiving considerable attention. More than 1,000 contracts traded on each of these strikes within roughly the first hour and a half of trading.

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Options Update: Call Buying for Crocs Inc. and Research In Motion Limited

Betting on an earnings rally for a shoemaker,and a long-term bullish position on a smartphone specialist

by Joseph Hargett (jhargett@sir-inc.com) 11/2/2009 1:30 PM

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RIMM

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