RIG - Transocean Ltd. – Two massive bullish transactions utilizing nearly 110,000 call options on the provider of offshore contract drilling services for oil and gas wells indicates at least one big options player is taking a long-term optimistic stance on the stock. RIG’s shares inched up 0.50% this afternoon to trade at $47.00 as of 3:15 pm ET. The nearer-term of the two spreads looks to be a variation on the traditional call butterfly spread because volume at the lower strike price [wing 1] is the same as that used in the body of the butterfly. Typically, a butterfly spread is constructed using a 1X2X1 ratio. The longer-term spread employed in the February 2011 contract looks like a normal butterfly. In this transaction the investor enjoys maximum profits if RIG’s shares surge 38.3% to settle at $65.00 by February expiration day. The transaction involved the purchase of 15,000 calls at the February 2011 $50 strike [wing 1] for an average premium of $5.5250, the sale of 30,000 calls at the February 2011 $65 strike for an average premium of $1.475 [body], and the purchased of 15,000 calls at the higher February 2011 $80 strike for an average premium of $0.425 apiece. The net cost of this transaction amounts to $3.00 per contract. Transocean’s shares must rally 12.8% by February expiration in order for the investor to breakeven on the spread at a share price of $53.00. The investor may accumulate maximum available profits of $12.00 per contract if Transocean’s shares surge 38.3% to $65.00 by expiration day. The spread initiated in the November contract is similar in its bullishness, although differs with respect to the lopsided nature of the wings, time to expiration, and strike price selection. In this trade the investor the purchased 19,500 in-the-money calls at the November $45 strike for an average premium of $6.175, and sold the same number of calls at the higher November $55 strike for an average premium of $2.22 each. The third leg of the trade is half the size, that’s 9,750 calls purchased at the November $65 strike for an average premium of $0.725 apiece. The investor or investors responsible for these transactions are well positioned to benefit handsomely from bullish movement in the price of the underlying shares in the months to come.
AKAM - Akamai Technologies, Inc. – The provider of services for improving the delivery of content over the Internet suffered significant share price erosion during the session, with its shares down 13.00% to $38.30 minutes before the closing bell. One options investor purchased a plain-vanilla debit put spread in the November contract to prepare for additional bearish movement in the price of AKAM’s shares. The trader picked up roughly 4,300 puts at the November $38 strike for an average premium of $3.75, and sold the same number of puts at the lower November $32 strike for an average premium of $1.52 a-pop. The net cost of the spread amounts to $2.23 per contract. Thus, the strategist is poised to profit should Akamai’s shares decline another 6.60% to breach the effective breakeven price of $35.77 by expiration day in November. The trader stands prepared to accumulate maximum potential profits of $3.77 per contract should shares plunge16.45% to trade below $32.00 by expiration.
VPRT - VistaPrint, Ltd. – Shares of the provider of business cards, brochures and other products and services took a severe hammering during the trading session, falling as much as 38.3% to touch down at an intraday- and new 52-week low of $31.00, following a disappointing earnings announcement on Wednesday evening. VistaPrint’s fourth-quarter net income of $0.38 a share narrowly beat Street estimates, but the company’s forecast for first-quarter earnings and for fiscal 2011 came in well below that which analysts were expecting. VPRT estimates it will earn $2.09 to $2.24 per share in 2011 on revenue of $750 million to $780 million, while analysts were looking for an average of $2.36 per share in net income on revenue of $802.6 million. The significant decline in the price of the underlying shares and disappointing guidance from VPRT inspired bearish options activity on the stock as well as a plethora of downgrades by various analysts. Investors expecting VistaPrint’s shares to continue lower ahead of August expiration scooped up approximately 2,000 puts at the August $30 strike for an average premium of $0.87 per contract. Put buyers at this strike make money if, by expiration, shares fall another 6.00% from today’s low of $31.00 to breach the average breakeven point on the puts at $29.13. Options players also picked up 1,300 now in-the-money puts at the August $32.5 strike for an average premium of $1.83 a-pop. In-the-money put buyers are poised to profit should shares edge 1.05% lower to trade beneath the average breakeven price of $30.67 by expiration daya. Finally, investors betting VistaPrint’s shares are not likely to rebound ahead of August expiration shed 1,200 calls at the August $35 strike to take in an average premium of $1.10 per contract. Call sellers keep the full premium received as long as VPRT shares trade below $35.00 through expiration day next month. In total, options traders exchanged more than 25,300 contracts on the stock by 2:10 pm ET, which is more than twice the number of contracts comprising previously existing open interest on VPRT of 10,554 lots. Options implied volatility is up 8.6% to 48.86% in afternoon trading.
