Today's tickers: MET, C, LTM, YHOO, HPQ, QCOM, F & HTX
MET – Metlife Inc. – Shares in multi-line insurer, Metlife have taken a 20% hit Tuesday morning. Meanwhile a measure of uncertainty on future share price direction predicts more heartache ahead for investors. Option implied volatility on the stock has risen by 40% to 207% while investors have bought rights to sell shares at prices 30% lower than today's $18.07 share price. With November's expiration happening at the weekend, investors are placing fresh bets by buying 12.5 strike puts to the tune of 2,600 contracts where current premiums are 40 cents. Before today's trading no positions existed at the strike. Meanwhile investors added to 1,070 bearish bets at the 15.0 strike as they scooped up puts reserving the right to sell at that price paying 85 cents for the privilege. The two most popular havens for speculators or stock holders were at the 17.5 and 20.0 strikes where 9,000 lots traded at each. The curious feature of today's trading was the fact that most positions were placed in the front contract with just days to expiration. If the share price remains above the strike prices traded today, those put contracts will expire worthless.
C – Citigroup Inc. - The single most popular equity option venue today is once again at Citigroup where some 180,000 contracts have changed hands as the underlying share price has slipped a further 6.7% to $8.30. Most active option trading is at the January expiration 7.5 strike where investors have taken positions in 37,000 contracts at a 1.65 premium. Current open positions amount to 94,327 contracts and so we could be seeing some unwind of profitable bets that the share price would indeed fall. Citi's stock price has halved in a month and lost three-quarters of its value since peaking in December.
LTM – Life Time Fitness Inc. – We noted extraordinary activity in December puts in this issue yesterday, and we're seeing more of the same today. Shares at $11.34 are 4% lower again today while put buyers are driving up prices at the 10.0 strike in the December contract. Put open interest doubled on yesterday's trading to 39,044 contracts and today's 17,458 lots at this single strike price once again grabs our attention. Implied volatility is relatively steady at 102%.
YHOO – Yahoo Inc! – Perhaps now that Jerry Yang has stepped aside as CEO of ailing Yahoo! we're seeing the 'yeehaw!' effect in play. Investors bought shares in the second largest Internet search engine in hopes that the shift of management might spur fresh talks with Microsoft. Since Yahoo! under Yang has shed some $20 billion in market cap since those talks failed, investors are now prepared to bet that a new leader will present a more affable proposition to Microsoft. With shares 13.6% higher at $12.08 there is no shortage of optimists who believe that a partial MSFT bid might achieve a bid as high as $18.00 per share. Judging by the option strategy employed by one investor in the deferred April 2009 contract, a floor is in place for Yahoo!'s shares now that Yang is gone. An investor sold 5,500 put options at the 10.0 strike for a 2.09 premium while purchasing upside risk at the 13.0 strike for 2.75. The upside potential is unlimited and effectively costs the investor just 66 cents per contract.
HPQ – Hewlett-Packard Corp. – The company managed to deliver earnings growth in a poor environment, which makes an 11.6% share price gain to $32.67 quite understandable. Sales grew 19% on the quarter and the company beat expected earnings by 3% proving just how competent it is in dealing with a tougher economic environment. Options traders focused on both the December and January contracts. The 1.70 premium at the December strike shows investors believe that HPQ could trade as high as $36.70 before the options expire in a month. They added 16,000 calls to established positions amounting to 8,352 lots. At the same strike in January a further 16,600 calls changed hands at a higher premium of 2.50 while investors also targeted 37.5 and 40 strike calls this morning.
QCOM – Qualcomm Inc. – For a company whose shares bucked the market rally today falling by 1.8% to $31.09, option volume was on the heavy side at 31,000 contracts. Curiously activity was on the bullish call side where investors traded the January 25 and 32.5 strikes. The lower strike here is deep-in-the-money and the premium rich at 7.50. The 32.5 calls traded 7,118 times at around 2.75 while existing open interest stands at just 6,720 lots. Option implied volatility today is barely changed at around 71%.
F – Ford Motor Co. – As heads of the not-so-big-three-anymore automakers head to Congress to ask for a rather large loan worth several times their joint market capitalization, a hefty chunk of puts traded in Ford's 7.50 series at the January contract. Some 62,500 puts traded at a 6.0 premium to the middle of the market. Because Ford's stock, amongst others, has become hard to borrow, investors tend to use puts to place bearish bets. Compared to existing open interest of 231,777 contracts, today's trade is a drop in the ocean. By noon shares had stopped rising and stood unchanged at $1.72.
HTX – Hutchison Telecommunications ADR – The mobile and fixed-line telecommunications company recently rebounded from a 52-week low at $12.52 and last week investors were treated to a special and rather large special dividend. The company said it had failed to find a suitable Asian acquisition and so was distributing cash to shareholders on record. The stock flew north, but has subsequently come back to earth. Today, with its shares marginally lower at $18.94 our market scanners have picked up unusual activity involving bearish activity. Investors have only a total of 3,764 positions outstanding on the company before today. In the June contract investors bought 6,500 put options for just 10 cents each, granting them selling rights at a fixed $12.50 share price. The logic here is that an investor believes the share price won't maintain its healthy status, partially inspired by the special dividend and might just retreat towards the recent low.
