DOW - The Dow Chemical Co. – Shares of the manufacturer of chemicals and plastic materials increased 2% during the trading session to $29.45. We observed a mix of bullish and bearish option plays on the stock today. One investor appears to have unraveled an in-the-money ratio call spread in the December contract in order to finance the purchase of 7,500 calls at the December 28 strike for 1.92 apiece. Further along, in the January 2010 contract, another bullish player rolled a long call position to a higher strike price. It looks like the investor originally paid between 2.35 to 3.30 in premium to buy 5,000 calls at the now deep-in-the-money January 24 strike back on September 14, 2009. Today the trader closed out the December 24 strike calls by selling 5,000 contracts for 5.30 each. The closing sale of the calls was spread against the purchase of 5,000 fresh call options at the higher January 28 strike for about 2.45 premium per contract. Finally, protective plays dominated the March 2010 contract. Two put spreads were established this afternoon. The first transaction involved the purchased of 5,000 puts at the March 27 strike for 2.08 each, marked against the sale of the same number of puts at the lower March 20 strike for 47 cents apiece. The net cost of the trade amounts to 1.61 per contract and yields protection beneath the breakeven price of $25.39. The other put spread involved the same number of put options but was transacted at the March 26/19 strikes at a net cost of 1.38 per contract. Downside protection on this play kicks in if shares decline through the breakeven point at $24.62 by expiration day in March.
GLD - SPDR Gold Trust ETF – More than 253,800 option contracts changed hands on the GLD with about 30 minutes remaining in the trading day. Investors traded calls on the exchange-traded fund more than 1.8 times to each put option in play. Shares of the GLD, which replicates the performance of the price of gold bullion, are up 0.25% in late-day trading to stand at $111.90. A large-volume ratio call spread on the fund suggests some investors expect the price of gold to rise sharply by expiration in January 2010. Bullish traders bought approximately 15,000 calls at the January 112 strike for an average premium of 3.88 apiece, spread against the sale of 30,000 calls at the higher January 122 strike for about 1.14 each. The net cost of putting on the ratio spread amounts to 1.60 per contract. Investors employing the call spread strategy stand ready to accumulate maximum potential profits of 8.40 per contract if shares of the GLD surge 9.5% to $122.00 by expiration. Traders populating the January 2010 contract with bullish transactions foresee greater heights for the price of gold over the next few months.
SPWRA - SunPower Corp. – Shares of the manufacturer of solar power products are down more than 17% this morning to $22.49 on news the firm may have to correct millions of dollars in accounting mistakes over the past three quarters. Investor uncertainty, as measured by option implied volatility, surged 31.73% to 66.89%. Option traders exchanged more than 19,200 contracts on the stock by 10:10 am (EDT). Fresh put positions were initiated at the November 22.5 and November 20 strike prices.
AGO - Assured Guaranty Ltd. – The insurance company reported better-than-expected third-quarter profits of 44 cents per share, beating average analyst estimates by 13 cents per share. Shares of AGO are trading 21% higher this morning, reaching a new 52-week high of $25.55. Investors exchanging call options at the November 30 and December 30 strike prices are perhaps positioning for continued bullish movement in shares.
SINA - SINA Corp. – The online media company’s shares rose 9% to a new 52-week high of $46.68 this morning. Third-quarter earnings of 34 cents per share bested analyst expectations by 3 pennies per share. Option implied volatility on the stock contracted 17.46% to 40.03% following earnings. More than 8,200 option contracts traded on SINA as of 10:25 am (EDT).
