IVN – Ivanhoe Mines Limited – Shares of the international mineral exploration and development company surged 20% during the trading session to reach an intraday high of $10.66. The Canadian stock was fueled by reports which revealed that changes to Mongolia’s laws will help the company to complete an investment agreement on the Oyu Tolgoi copper-gold project in the near future. One investor, who had positioned himself to profit from a rally in Ivanhoe, was seen banking gains today by selling to close a long call position. It appears he originally purchased some 17,000 calls for an average premium of 90 cents each around July 30, 2009. Today he shed all 17,000 contracts for a premium of 2.05 apiece. The investor has realized approximate gains of 1.15 per contract for a total of $1,955,000. Bullish activity was seen at the March 2010 15 strike price where it looks like investor purchased 5,000 calls for one dollar apiece. Traders long the calls will profit if shares rally another 50% to breach the breakeven price of $16.00 by expiration next year.
FDX – FedEx Corp. – Bullish action on FedEx this afternoon boosted the firm onto our ‘most active by options volume’ market scanner with the stock trading more than 0.5% higher to $68.40. Traders shed 8,500 put options at the October 60 strike price to take in an average premium of 1.03 per contract. The full premium will be retained by these individuals as long as the puts land out-of-the-money at expiration. Investors are happy to accept the 1.03 premium in exchange for bearing the risk that the stock slips lower, and falls beneath the breakeven point to the downside at $58.97. Losses begin to accumulate for traders if FedEx trades at a price lower than the breakeven point by expiration in October. We note that the stock has remained above $60.00 since July 16, 2009.
XLI – Industrial Select Sector SPDR – The industrials exchange-traded fund has risen less than 1% to stand at $25.50. One investor took hold of a large chunk of put options on the XLI by purchasing 40,000 puts at the September 24 strike price for 25 cents apiece. This trader may be bearish, in which case he aims to amass profits to the downside if the XLI declines beneath $23.75 by expiration next month. Alternatively, the investor may have purchased shares of the underlying in the expectation that shares will continue to climb higher. If this is the case, the puts were picked up as an insurance policy in the event that the fund fails to rise. Next, a number of option strategies were employed by investors populating the January 2010 contract. Plain vanilla put buying was seen at the January 24 strike where 3,500 lots cost investors 1.35 each. Other traders initiated a sold strangle by shedding 1,000 puts at the January 25 strike for 1.68 each, in combination with the sale of 1,000 calls at the higher January 26 strike for 1.47. The gross premium of 3.15 on the strangle will be retained in full as long as shares of the XLI remain ‘strangled’ between the strike prices described. Finally, a bullish reversal was enacted at the January 24/26 strikes as an investor shed 1,000 puts at the lower strike for 1.65 each in order to finance the purchase of 1,000 higher strike calls for 1.50. This individual enjoys a net credit of 15 cents on the transaction and may achieve additional profits if the stock rallies higher than $26.00 by expiration.
