POT – Potash Corp. of Saskatchewan, Inc. – Shares of the fertilizer and feed products producer rallied to a new 52-week high of $126.98 in morning trading after the firm raised its first-quarter profit forecast. Shares are trading slightly below the intraday and 52-week high of $126.98, but are still up 7.45% to $125.68 as of 12:35 pm (ET). The Canada-based company revealed it expects first-quarter earnings to be between $1.30 and $1.50 per share, which is significantly higher than its previous estimate of $0.70 to $1.00 a share. Options players populated the stock with numerous trading strategies, and exchanged more than 115,000 contracts on POT by lunchtime. One bullish individual initiated a ratio call spread in the March contract. The trader purchased 1,500 in-the-money calls at the March $125 strike for a premium of $2.93 apiece, and sold 3,000 calls at the higher March $135 strike for $0.59 each. The net cost of the spread amounts to $1.75 per contract. Thus, the bullish player stands ready to accrue maximum potential profits of $8.25 apiece if POT’s shares rally up to $135.00 by expiration day next Friday.
CLF – Cliffs Natural Resources, Inc. – Citing the potential for higher iron ore and coal prices, analysts at JPMorgan Chase & Co., increased their target share-price estimate on Cliffs Natural Resources to $83.00 from $60.00 today. Cliffs’ shares burst higher following the upgrade, rallying 5.35% to a new 52-week high of $63.53. North America’s largest producer of iron-ore enticed bullish options players to the March $65 strike where more than 2,300 calls were scooped up for an average premium of $1.14 apiece. Call-coveters are prepared to profit should CLF’s share price increase 4.10% from the current value to exceed the breakeven point on the calls at $66.14 by expiration day next Friday.
PAYX – Paychex, Inc. – Shares of the provider of payroll and integrated human resource and employee benefits outsourcing solutions rallied 0.70% to $32.11 during the session. The increase in the price of the underlying shares inspired demand for out-of-the-money call options in the March and April contracts. Bullish players purchased approximately 11,800 call contracts at the March $32.5 strike for an average premium of $0.19 per contract. Investors long the calls stand ready to amass profits if PAYX shares trade above the breakeven price of $32.69 by expiration day next Friday. Optimism spread to the April $32.5 strike where 1,400 calls were picked up for an average premium of $0.66 each. The surge in options trading activity on PAYX lifted its reading of overall options implied volatility 12.6% to 22.13% today.
ERIC – LM Ericsson Telephone Co. – The maker of mobile communications infrastructure equipment attracted bullish investors today amid a 3.25% rally in its share price to a new 52-week high of $11.20. Options traders honed in on call options in the July contract to position for a sharp rally in ERIC’s underlying share price by expiration. Investors purchased approximately 5,000 call options at the July $12.5 strike for an average premium of $0.30 per contract. Call-buyers profit if shares increase at least 14.25% from the current value of the stock to surpass the average breakeven point at $12.80 by July expiration. Investors exchanged 6,950 options on ERIC by 12:20 pm (ET), which represent 16% of the total existing open interest on the stock of 43,376 contracts.
SVU – SUPERVALU Inc. – Call options on grocery retailer, Supervalu, are flying off the shelves this morning as unconfirmed leveraged buyout rumors sparked an 11.45% rally in SVU-shares to an intraday high of $17.89. Options players exchanged more than 10 call options on the stock for each single put option traded thus far in the session. The surge in investor demand for options on Supervalu bumped up the reading of overall options implied volatility 58.7% to 45.24% as of 10:40 am (ET). Traders purchased more than 4,400 calls at the March $17.5 strike for an average premium of $0.36 per contract, while investors targeting the higher March $20 strike picked up about 1,000 calls for $0.19 each. Call volume is greatest at the April $17.5 strike where more than 15,700 contracts changed hands in the first seventy minutes of the trading day. Approximately 9,700 of the calls were purchased for an average premium of $0.50 apiece. Investors long the April $17.5 strike calls profit if shares trade above the effective breakeven price of $18.00 ahead of expiration day in April.
LFC – China Life Insurance Ltd. – Short straddles enacted on China’s largest insurer indicates shares of the underlying stock my remain range-bound through expiration day in October. China Life Insurance’s share price surrendered 0.20% this morning to trade at $70.40. One investor initiated the straddle strategy by selling 1,500 call options at the October $70 strike for an average premium of $6.43 apiece, in combination with the sale of 1,500 puts at the same strike for $6.60 each. Gross premium pocketed on the transaction amounts to $13.03 per contract. The straddle-player keeps the full premium received today if LFC’s shares settle at $70.00 at expiration. The hefty premium on the trade provides protection against losses should the insurer’s shares shift in either direction about the central strike price. However, the investor will accrue losses if China Life’s shares trade above the upper breakeven price of $83.03, or if shares slip beneath the lower breakeven point at $56.97, ahead of October expiration.
CA – CA, Inc. – Near-term bullish options activity was initiated on the independent information technology management software company this morning despite a slight 0.30% decline in the value of its shares to $22.59. Investors sold 6,800 puts short at the March $22.5 strike to take in a premium of $0.15 per contract. Put-sellers keep the full premium if CA’s shares trade above $22.50 through March expiration next Friday. However, traders selling the contracts are apparently happy to have shares of the underlying stock put to them at an effective price of $22.35 each should the put options land in-the-money at expiration.
