UUP - PowerShares DB US Dollar Bullish Fund – A pair of bullish risk reversals on the PowerShares US Dollar Bullish Fund suggests today’s sharp rally for the dollar will likely continue over the next several months. We observed massive bullish plays on the UUP over the past couple of weeks, some tied to machinations of whether or not the fund had enough shares in circulation. But today’s activity predicts far more extreme movements in the price of the dollar index. The UUP is current up 1.4% to $22.80, while the dollar index, which it supposedly tracks, is up just 0.7%. Investors sold 4,700 deep in-the-money put options at the December 29 strike for an average premium of 6.30 apiece, spread against the purchase of 4,700 calls at the same strike for one nickel each. The high-delta put options hold very little extrinsic value because expiration is just over one month away. Thus, investors are expecting the intrinsic value of the puts to decline. The only way this will occur is if the dollar rallies forcing the UUP to increase. If traders’ bullish predictions are correct, the value of the long calls will appreciate, while premium on the short puts erodes. Such a scenario allows investors to profit by buying back the puts for less than the 6.25 net premium received on the reversal. A similar uber-bullish strategy was employed at the January 2010 28 strike price where investors sold 4,250 deep-in-the-money puts short for about 5.30 each, and purchased the same number of calls for 5 cents apiece.
GMCR - Green Mountain Coffee Roasters, Inc. – Shares of specialty coffee maker, Green Mountain Coffee Roasters, are 9.5% lower this morning to $68.94 as of 9:50 am (EDT). The Vermont-based firm doubled its profit in the fourth quarter, earnings 34 cents per share as compared with 18 cents in the previous year. Green Mountain’s share price slipped today because the firm stated first-quarter earnings are likely to disappoint. GMCR proffered first-quarter profit guidance of 11-15 cents per share while average analyst expectations range from 19-37 cents per share. Option implied volatility on the stock is lower by 28.87% following earnings to stand at 53.47%. Investors exchanged more than 18,600 option contracts on GMCR within the first 30 minutes of the trading session.
CTRP - CTrip.com International, Ltd. – The travel service provider’s shares jumped 8.5% to a new 52-week high of $69.73 today. CTRP posted better-than-expected third-quarter earnings that sent shares up as much as 13% after the close on Wednesday. Third-quarter profits of 39 cents per share exceeded average expectations of 32 cents. The firm also said it expects revenue growth in the fourth quarter. Investors traded 9,000 option contracts, or 20% of total existing open interest of 43,763 lots, by 10:15 am (EDT). Option implied volatility is 22.70% lower to stand at 51.55%.
DOW - The Dow Chemical Co. – Shares of the chemical manufacturer reached a new 52-week high on a 7.5% run up this morning to $28.71. The firm revealed it expects to earn $4.00-$4.50 in 2012, and stated the benefits of acquiring Rohm and Haas to its investors in a meeting today. The Michigan-based chemical company has pared noncore assets and slashed costs to reduce debt from the Rohm acquisition. Option traders exchanged more than 27,000 option contracts on Dow as of 10:30 am (EDT).
