• Home ::
• Fundamental ::
• Analysis Reports ::
• Daily Options Intelligence Report

• Send
• Print
• Add To
• Rss

Daily Options Intelligence Report

623da557-b92c-4969-b512-47584e351520

1

0

Option traders sow the seeds at Origin Agritech

Tue, Nov 24 2009, 18:12 GMT
by Andrew Wilkinson

Interactive Brokers LLC

SEED – Origin Agritech Ltd. – Frenzied options activity continues today on Beijing-based seed producer, Origin Agritech, following yesterday’s announcement that the firm received approval from China’s Ministry of Agriculture to sell its genetically modified phytase corn. Shares are currently up 4% to $10.86, down from an intraday high – and 52-week high – of $11.75. Bullish investors took root in the December contract, purchasing 6,900 calls at the December 12.5 strike for an average premium of 87 cents each. SEED-optimists also engaged in put selling at the December 10 strike where 5,300 contracts sold for about 1.02 apiece. Many traders employed covered-call selling during yesterday’s trading session, and it appears a number today’s investors followed suit. Approximately 7,000 calls were sold – likely against long stock positions – at the December 12.5 strike for roughly 87 cents premium apiece. Finally, uber-bullish traders picked up 2,600 calls at the December 15 strike for 36 cents per contract. SEED’s shares must surge a whopping 41% over the current price in order for December 15 strike call-buyers to breakeven at $15.36. Investor uncertainty, as measured by option implied volatility, is up 15.37% to 115.15%, which is slightly lower than the intraday high of 134%.

EWZ – iShares MSCI Brazil Index ETF – December-contract option trading patterns today suggest a shift in investor sentiment on the Brazil Index ETF. One investor unraveled a large-volume bearish butterfly spread, while another trader initiated a bull call spread on the fund. Shares of the EWZ are slightly lower by 0.75% to stand at $75.69. On November 4, 2009, a Brazilian-bear established a December 60/65/70 butterfly spread at a net cost of 59 cents per contract. Today the trader banked net profits of 39 cents per contract by closing out the 15K/30K/15K spread. Maximum available profits on the butterfly spread were 4.41 per contract if shares of the ETF had declined to $65.00 by expiration. Thus, the trader left significant profits on the table. This implies the investor essentially threw in the towel, and merely took in what premium was available on the spread today. Perhaps the trader unraveled the trade because he expects shares of the EWZ to rise ahead of expiration. Bullish sentiment on the fund took the form of a plain-vanilla call spread. One investor purchased 5,000 calls at the December 76 strike for 2.49 apiece, and simultaneously shed the same number of calls at the higher December 82 strike for 55 cents premium each. The net cost of the optimistic transaction amounts to 1.94 per contract. Maximum potential profits of 4.06 apiece are available if shares surge 8% to $82.00 by expiration in December.

DE – Deere & Co. – Shares of the agricultural equipment manufacturer are up 1.25% to $52.47. Option traders established bullish stances on the stock by selling put options in the December contract. Investors sold more than 5,100 puts at the December 50 strike for an average premium of 1.19 each. Put-sellers retain the full premium received on the sale as long as shares of DE remain above $50.00 through expiration. The short sale of the puts suggests investors are happy to have shares of the underlying stock put to them at an effective price of $48.81 apiece in the event that the put options land in-the-money.

STLD – Steel Dynamics, Inc. – Long-term bullish plays on the manufacturer of steel products indicates shares are not likely to move much lower by expiration in May 2010. STLD’s shares are down 1% to $16.45 as of 12:30 pm (EDT). Option traders sold approximately 8,000 puts at the May 15 strike for an average premium of 1.60 apiece. Investors retain the full 1.60 premium if Steel Dynamic’s shares remain above $15.00 over the next six months. Put-sellers stand prepared to have shares of the underlying stock put to them at $13.40 if the put options land in-the-money by expiration. We note that shares of STLD traded down to $13.40 as recently as October 30, 2009.

Published on  Tue, Nov 24 2009, 18:12 GMT