ILMN - Illumina Inc. – The biotechnology firm’s shares slipped 3% today to $42.48. Profit-taking by one investor pushed the ILMN ticker symbol onto our ‘hot by options volume’ market scanner. It appears the trader originally sold 5,000 puts short at the November 35 strike for 95 cents apiece back on September 22, 2009. Today, the investor closed out the short position by buying the put options back for 25 cents each. Net profits enjoyed on the closing purchase amount to 70 cents per contract for a total of $350,000. Next, the investor reestablished a short put position by selling 5,000 puts at the November 40 strike for an average premium of 1.12 apiece. The full 1.12 premium may be fully pocketed by the trader if shares of ILMN remain higher than $40.00 through expiration.
USB - US Bancorp. – Options activity in the near-term November contract suggests at least one investor anticipates greater volatility in the price of USB shares through expiration. Shares of the financial holding company edged 1% lower this afternoon to $23.56. A long strangle play took place through the purchase of approximately 2,000 puts at the November 23 strike for an average premium of 65 cents each, and the purchase of 2,000 calls at the November 24 strike for about 73 cents apiece. The strangle cost the investor a net 1.38 per contract to implement. The transaction may prove to be profitable to the trader if shares of USB either shift above the upper breakeven point at $25.38, or if the stock moves beneath the lower breakeven price of $21.62, by expiration day. Volatility on USB rose 13% from an intraday low of 31% to a high of 35.5%.
CCJ - Cameco Corp. – The world’s second-largest producer of Uranium experienced a more than 5.5% rally in shares during the trading session to $31.31. Shares in a number of uranium companies rose after an Australian newspaper revealed BHP Billiton Ltd. declared force majeure on uranium and copper sales from its Olympic Dam mine. Force majeure is a contract provision that excuses a supplier from liability due to uncontrollable circumstances. In this case, a BHP mine in South Australia will be out of commission for at least a month due to mechanical difficulties. Investors expecting shares of CCJ to rally higher purchased near-term call options 2,500 times at the November 35 strike for an average premium of 46 cents apiece. Call-buyers may accumulate profits if shares of CCJ rise 13% from the current price to surpass the breakeven point at $36.46 by expiration next month.
AAPL - Apple, Inc. – Option implied volatility on the maker of the iPhone plummeted 30% to 25.78% following yesterday’s fourth-quarter earnings report. Apple posted profits and sales that exceeded even the more generous forecasts for the firm, sending shares up 5% to the $200.00-level. Option volume exploded to nearly 160,000 contracts by 10:00 am (EDT). Let’s keep an eye on the technology bellwether today to see how investors react to AAPL’s positive earnings report.
PFE - Pfizer, Inc. – The global pharmaceutical company continues to attract droves of option traders who exchanged about 60,000 contracts by 10:00 am (EDT). The firm posted third-quarter earnings of 51 cents per share that beat street estimates by about 3 pennies. Options on Pfizer surged during yesterday’s session, will we see similar heavy volume today?
CAT - Caterpillar, Inc. – Third-quarter results for CAT beat expectations by posting profits of 64 cents per share. Shares are up nearly 4% to $60.00 with option traders tossing around upwards of 60,000 contracts on the stock this morning. Perhaps the good news from CAT today points to signs of economic recovery for the global economy.
