VALE - Vale S.A. – Iron ore producer, Vale, experienced a more than 2.5% rally in shares during the trading session to arrive at a new 52-week high of $29.64. A bullish risk reversal in the March 2010 contract today indicates at least one investor is positioning for continued upward movement in the price of VALE shares by expiration. The trader sold approximately 3,300 puts at the March 26 strike for an average premium of 1.29 apiece in order to finance the purchase of roughly 3,300 calls at the higher March 32 strike for 1.59 each. The net cost of the transaction amounts to 30 cents per contract and positions the investor to amass profits if shares surpass the breakeven price of $32.30 by expiration. Shares must jump at least 9% from the current price to breach the effective breakeven point on the trade.
GLD - SPDR Gold Trust ETF – Shares of the gold exchange-traded fund, which replicates the performance of the price of gold bullion, rose 1.5% today to yet another all-time high of $116.43. We observed bullish activity in the June 2010 contract by one investor who initiated a call spread on the fund. It appears the trader purchased 13,265 calls at the June 125 strike for an average premium of 5.95 each, spread against the sale of the same number of calls at the higher June 150 strike for 2.10 apiece. The net cost of the gold-spread amounts to 3.85 per contract. The investor responsible for the trade accumulates profits if shares rally 11% from the current price and surpass the breakeven point at $128.85. Maximum potential profits of 21.15 per contract are available to the trader in the event that shares of the GLD surge 29% to $150.00 by expiration day in June of 2010.
BKC - Burger King Holdings, Inc. – Burger King-bulls bought nearly 4,700 calls at the in-the-money December 17.5 strike for an average premium of 50 cents apiece. Such activity suggests investors expect shares to rally through $18.00 – the breakeven point on the calls – by expiration in December. Bullish sentiment on the flame-broiled burger maker is perhaps inspired by strength in the fast-food restaurant sector. Cash-strapped consumers, wary of the 10.2% unemployment rate, are likely trading down from moderately priced eateries to cheaper nosh provided by the fast-food companies. BKC’s Senior Vice President of Investor Relations and Global Communications, Amy Wagner, said in a November 22, 2009, interview that the firm is laying the “foundation for future growth of the company” by focusing on global expansion and greater market presence. Bullish investors, it seems, expect Burger King’s shares to appreciate as more consumers feast on fast food to satisfy their budgets and appetite. Option implied volatility on the stock reached a two-year low of 20.66% in early morning trading.
JCG - J. Crew Group, Inc. – Shares of luxury clothing retailer, J. Crew, are up nearly 7% this morning to $43.64 after the firm posted third-quarter profits of 67 cents per share, which exceeded average analyst expectations of 58 cents. JCG’s option implied volatility contracted 17.94% to 42.98% as of 10:05 am (EDT). Option traders exchanged roughly 4,300 contracts on the stock. Notable call buying activity in the amount of 1,778 contracts is centered at the December 45 strike.
BKC - Burger King Holdings, Inc. – Bullish call buying activity in the December contract this morning counters the 0.25% decline in shares of Burger King to $17.72. Investors exchanged 4,551 calls at the in-the-money December 17.5 strike for an average premium of 45 cents apiece. It appears the majority of the call activity, which represents roughly 30% of total existing open interest on the stock of 15,442 lots, was purchased by BKC-bulls. Burger King’s option implied volatility descended to a two-year low of 20.66% at 9:45 am (EDT).
TIF - Tiffany & Co. – Option implied volatility on the luxury jewelry retailer collapsed 23.65% to a two-year low of 32.02% following better-than-expected earnings for the third quarter. Tiffany’s shares gained as much as 5.2% this morning to a new 52-week high of $44.01 after profits of 33 cents per share exceeded analyst expectations by 9 cents per share. Investors traded roughly 7,000 option contracts on the stock by 10:25 am (EDT).
