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Daily Options Intelligence Report

Opportunist dollar bear hones in on PowerShares

Wed, Jul 29 2009, 17:06 GMT
by Andrew Wilkinson

Interactive Brokers LLC  |  View company's profile

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UUP – PowerShares US Dollar Index Bullish fund – As noted in our IB FX View earlier this morning, demand for the dollar as a safety play is emerging with notable declines of the other traditional safety plays of the yen and the Swiss franc against the dollar at least. One option investor is taking advantage of this dollar strength through a bearish stance using options on this dollar bullish index fund. The recent bearish tack for the dollar saw the price of this bull fund languish lately and its price reached a low at $23.35 for a 10-month low. The sudden reversal in the dollar’s fortunes has lifted shares to $23.70 earlier today. An option player sold calls at the nearby 24 strike and used the 25 cent premium to offset the richer cost of puts options at the same strike. Those 24 strike puts carry intrinsic value since they are already in the money. The investor is clearly dollar-bearish and doesn’t expect the near-term dollar advance to hold.

MBT – Mobile TeleSystems OJSC – The Russian cellular communications company appeared on our ‘hot by options volume’ market scanner today amid a more than 6.5% decline in shares to $38.29. Despite the current dip in price, investors seem to expect a brighter future, and were observed initiating bullish call spreads in the March 2010 contract. The March 40 strike price had 3,000 calls purchased for an average premium of 6.58 each, which were spread against the sale of 3,000 calls at the higher March 50 strike for 3.10 apiece. The net cost of positioning for a significant recovery in MBT amounts to 3.48. Investors stand to accumulate maximum profits of 6.52 per contract if shares can rally up to $50.00 by expiration. Shares will need to climb 14% from the current price in order for call-spreading traders to begin to amass profits at the breakeven price of $43.48.

DISH – DISH Network Corporation – Shares of the subscription television services firm are currently lower by about 1.5% to $16.84. Investors fearful of further declines in the price of the underlying were seen getting long of put options in the September contract. Approximately 5,500 puts were purchased at the September 16 strike price for an average premium of 95 cents apiece. Profits will begin to amass to the downside in the event that shares fall another 10% and breach the breakeven point at $15.05 by expiration. We note that DISH has remained higher than $15.05 since May 11, 2009.

CY – Cypress Semiconductor Corp. – The San Jose, CA-based firm has experienced a rally of 3.5% today to stand at $11.07. Cypress rose after receiving a positive recommendation from “Mad Money” host Jim Cramer yesterday, in addition to new coverage at ThinkEquity, which rates the stock as ‘buy’. Perhaps in an attempt to lock in recent gains, one investor chose to establish a put spread in the December contract. The transaction involved the purchase of 7,500 puts at the December 11 strike price for a premium of 1.30 apiece against the sale of 7,500 puts at the December 10 strike for 80 cents each. The net cost of the spread amounts to 50 cents and yields maximum potential profits of 50 cents to the investor if shares slip back to $10.00 by expiration.

Published on  Wed, Jul 29 2009, 17:08 GMT

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