MCD - McDonald’s Corp. – Egg McMuffin-maker, McDonald’s Corp., experienced a 1.5% rally in shares to $62.57, allowing some investors to bank significant profits today. Shares of world’s largest restaurant company increased on news that global sales rose 3.3% in October. A couple of traders lined their pockets with profits by closing out short put positions in the December contract. It appears one investor originally sold 10,000 puts short at the December 50 strike, receiving 2.00 apiece back on June 8, 2009, when shares were trading at $58.52. Today the trader purchased to close the short position by buying back all 10,000 puts for just 6 pennies each. Net profits enjoyed on the transaction amount to 1.94 per contract for a grand total of $1.94 million. A similar strategy was employed at the higher December 52.5 strike. It looks like another trader sold 18,000 puts short at the higher strike, taking in approximately 2.00 in premium per contract, back on July 23, 2009. The investor was able to buy back the put options for just 9 cents apiece today because of the run up in shares since the short sale was established. Net profits amount to approximately 1.91 per contract for total gains of about $3.438 million.
SKS - Saks, Inc. – The high-end luxury fashion retailer edged onto our ‘hot by options volume’ market scanner today after an investor initiated a calendar roll on the stock. Shares jumped 6.2% to $6.51 on news that same store sales increased 0.7% last month. The trader received 7 pennies per contract for rolling 7,500 calls from the now in-the-money November 5.0 strike, up to the December 7.5 strike where he purchased the same number of contracts for 22 cents each. It appears the investor rolled the calls forward at a net loss because he originally purchased the November 5.0 strike calls for between 70-80 cents apiece back on September 18, 2009. Shares of SKS must rally at least 19% from the current price for the investor to break even at $7.72 by expiration in December.
VALE - Vale S.A. – The world’s largest iron-ore producer experienced a more than 5% rally in shares today, reaching a new 52-week high, of $28.95. One option trader banked some serious profits by selling-to-close a long call position in the December contract. The investor originally purchased about 30,000 calls at the December 30 strike for an average of 57 cents apiece on October 15, 2009. Today the trader took advantage of the sharp rally in share price by selling 30,000 calls for approximately 1.11 each. Net profits enjoyed on the sale amount to 54 cents per contract for total gains of $1.62 million. Option implied volatility on VALE has come off significantly since November 3, 2009, when volatility reached a three-month high of 55%. Volatility contracted 18% over the past seven days to arrive at the current reading of 45%.
V - Visa, Inc. – A previously established bullish stance on retail electronic payments network operator Visa, Inc., proved highly profitable for one investor today. Visa’s shares rose 1.5% to $80.94 during the session. The investor originally sold 10,000 puts at the December 55 strike to take in a premium of between 1.25-1.65 per contract. Today the trader closed out the short position by buying back the put options for 9 cents apiece. Net profits on the closing purchase amount to a minimum of 1.16 up to a maximum of 1.56 per contract. Today’s transaction results in potential gains of between $1.16 to $1.56 million.
LXK - Lexmark International, Inc. – Shares of the manufacturer of printing and imaging products are down 5% this morning to $25.34. Investor uncertainty on LXK, as measured by option implied volatility, is up 13.26% to 44.31%. It is unclear at this time what is possibly driving shares lower and uncertainty higher. The increase in volatility may be due, in part, to a rise in demand for options on Lexmark today. Investors exchanged more than 2,000 put options at the April 2010 20 strike price, perhaps to protect against further declines in the price of the underlying through expiration.
ANF - Abercrombie & Fitch Co. – The more than 6.5% rally in shares of teen/tween apparel retailer Abercrombie & Fitch to $37.34 this morning is surprising given disappointing earnings at several large retailers last week. Investors claimed fresh call positions this morning at the out-of-the-money November 39 strike where upwards of 2,300 calls changed hands by 10:00 am (EDT). Maybe traders expect shares to rally another 4.5% ahead of expiration this month.
DISH - DISH Network Corp. – Option implied volatility on the broadcasting and entertainment company contracted 16.55% to 45.74% following third-quarter earnings this morning. Shares of DISH are up more than 6% to $20.32 even though the firm posted a 13% decline in third-quarter profits. The number two U.S. satellite TV provider, however, gained 241,000 subscribers and announced a special dividend of $2 per share
