BG – Bunge Ltd. – Option traders were fast to predict continuing gains in global agri-producer, Bunge Ltd., as they aggressively bought call options aimed at harnessing further gains in its shares. With shares trading a little above $60 this morning, sharp-shooters forced call premiums at the November 60 strike upwards starting at 70 cents up to 1.25 as around 3,000 calls were exchanged within a matter of minutes. After a brief dip back down during the course of the morning Bunge’s share price attracted more attention and jumped to $62.64 for a 5.8% gain on the day. Those November calls rocketed to a premium of 2.70 per contract offering huge immediate gains to early-bird buyers. By noon more than 4,500 contracts have changed hands. The same picture was evident at the December 65 strike call where 5,500 calls have traded. About 2,000 contracts were purchased for as little as between 70cents and 1.00 before 10am and have since more than doubled to 1.95. The call activity caught the market napping and created a 15% jump in implied volatility driving premiums higher still.
ILMN – Illumina Inc. – Shares in the company that develops the toolkit for genomic researchers slipped 7% Wednesday to $29.05 on a day when EraGen announced a strategic partnership with Illumina to access its molecular tools technology. Option activity of 21,000 lots was above normal at 14-times the typical average volume. In the short-term investors appeared to sell call options at the 30 strike expiring in December in favor of bearish puts at the 25 strike. That would indicate whatever the catalyst for today’s drop in its shares (we don’t think the alliance with EraGen ought to send them into reverse gear) is likely to remain a negative factor through year end. Last month Illumina not only disappointed at earnings but also revised its forecast down. Thereafter, however, investors appeared to expect better things from the company. More than 5,500 call options were eagerly sought as the share price shrank, with investors paying up to 1.90 per contract to lock into fixed buying rights on shares ahead of January expiration implying a 10% recovery from present. The activity caused option implied volatility to rise about 20% to 49% today.
COH – Coach, Inc. – The handbag and accessories retailer received an upgrade to ‘buy’ from ‘neutral’ at Goldman Sachs Group on Monday, but experienced share price declines over the past couple of days. Declines continued today with shares currently lower by 1% to $34.17. Option traders displayed mixed sentiment on Coach by trading put options. Bullish investors sold 3,300 puts at the November 34 strike for an average premium of 25 cents each. Put-sellers retain the full 25 cents on the trade if shares remain at or above $34.00 through expiration on Friday. Meanwhile, option-bears targeted the December 33 strike to purchase 2,800 calls at an average price of 1.15 apiece. Pessimistic individuals accrue profits if shares of COH decline through the breakeven point to the downside at $31.85 by expiration in December.
TMO – Thermo Fisher Scientific, Inc. – Medical equipment provider, Thermo Fisher Scientific, attracted bearish investors to the March 2010 contract today. Shares are currently flat at $46.14. It appears one investor established a put spread by purchasing 3,000 puts at the March 45 strike for 2.50 apiece, marked against the sale of the same number of puts at the lower March 40 strike for 1.00 each. The net cost of the protective play amounts to 1.50 per contract. The trader responsible for the spread is likely aiming to protect the value of a long position in the underlying stock. If this is the case, the investor is protected in the event that shares of TMO slip beneath the breakeven price of $43.50 by expiration in March.
SPG – Simon Property Group, Inc. – Shares of the U.S. shopping mall owner are trading higher by 3% to $74.40 on news the cash-rich firm may purchase assets of bankrupt General Growth Properties Inc. One cautious investor scooped up downside protection on Simon this morning. Perhaps the trader fears the stock price may realize short-term declines if SPG acquires General Growth Properties. Otherwise, this individual is simply taking a bearish stance on the stock. The investor initiated a put spread by purchasing 4,000 puts at the December 70 strike for 2.25 each, and by selling the same number of puts at the December 65 strike for 1.00 apiece. The net cost of the spread amounts to 1.25 per contract and protects the trader if shares fall through breakeven price of $68.75 over the next four weeks. We note that SPG’s shares have remained higher than the effective breakeven point since November 6, 2009.
