COF – Capital One Financial Corp. – Bullish traders flocked to the “what’s in your wallet?” financial services company right out of the gate this morning to pick up near-term call options. Investors populating COF options exchanged more than 7 calls on the stock for each single put option in action ahead of midday in New York. Capital One’s shares increased as much as 2.8% earlier in the session to touch an intraday high of $39.93. The stock is currently trading 1.65% higher on the day to stand at $39.50 as of 11:30 am ET. Options investors hoping to see COF shares continue to appreciate ahead of expiration day this month purchased approximately 3,500 calls at the September $40 strike for an average premium of $0.68 each. Bulls holding these contracts make money if the credit card issuer’s shares rally 3.00% over the current price to trade above the average breakeven point to the upside at $40.68 by September expiration. Optimism spread to the higher September $41 strike where investors picked up 2,600 calls for premium of $0.35 per contract. Call buyers are poised to profit should shares of the underlying stock jump 4.7% to exceed $41.35 by expiration in just over one week’s time. Bullish traders also bought 1,300 call options at the September $42 strike at a premium of $0.17 a-pop. Investors break even on their purchases if COF’s shares surge 6.75% to trade above $42.17 by expiration day. Finally, uber-bulls bought roughly 1,100 calls at the September $43 strike for an average premium of $0.11 apiece. Investors long the calls make money if the financial services provider’s shares rally 9.1% and exceed the average breakeven price of $43.11 at expiration.
YHOO – Yahoo!, Inc. – A couple of different bullish options strategies initiated on the online media company this morning indicate some investors expect Yahoo’s shares to rebound by expiration in January 2011. The Sunnyvale, CA-based company’s shares increased as much as 1.92% to secure an intraday high of $13.79 as of 12:30 pm ET. Plain-vanilla call buyers itching for a sharp rally in the price of the underlying stock purchased approximately 2,000 lots at the January 2011 $15 strike for an average premium of $0.61 each. Investors long the calls make money if Yahoo’s shares surge 13.2% over the current price of $13.79 to exceed the average breakeven point at $15.61 by expiration day next year. Another optimistic options investor employed a different tactic. It looks like this trader established a bullish risk reversal, selling 5,000 puts at the January 2011 $12.5 strike for an average premium of $0.635 each in order to purchase the same number of January 2011 $17.5 strike calls at an average premium of $0.18 apiece. The trader pockets an average net credit of $0.455 per contract on the transaction, and keeps the full amount as long as Yahoo’s shares exceed $12.50 through expiration day. Additional profits start to accumulate should the online media firm’s shares jump 26.9% to trade above the effective breakeven price of $17.50 by January 2011 expiration day. We note that while the transaction looks bullish, open interest at all strikes described is sufficient to cover today’s volume many times over. Thus, the activity could potentially be the work of an investor closing out, adding volume to or subtracting volume from previously established positions on the stock.
ZGEN – ZymoGenetics, Inc. – Shares of the biotechnology firm engaged in developing therapeutic proteins to combat life-threatening illnesses jumped 84.7% to touch an intraday- and new 52-week high of $9.79 in the first half of the trading session after Bristol-Myers Squibb agreed to acquire the company for $885 million, or $9.75 per share in cash. Investors expecting ZymoGenetics’ shares to rally higher by November expiration purchased approximately 1,400 calls at the November $10 strike for an average premium of $0.10 each. Call buyers make money if the Seattle-based company’s shares increase 3.2% over today’s high of $9.79 to surpass the effective breakeven price of $10.10 by expiration day. The overall reading of options implied volatility on ZGEN came crashing down, falling 68% to 16.37%, following news of the buyout by Bristol-Myers Squibb.
NYT – New York Times Co. – Renewed speculation the newspaper publisher may be acquired inspired bullish options activity on the stock during the first half of the trading day. Shares in New York Times Co. jumped 8.00% to an intraday high of $8.38 in morning trading before cooling off by 12:15 pm ET to stand just 3.75% higher on the day at $8.05. Churning of the rumor mill sent speculators to the October $9.0 strike where more 4,200 calls changed hands versus puny previously existing open interest at that strike of just 5 call options. It looks like some traders, positioning for NYT’s shares to continue higher if the firm should perhaps receive a takeover bid by October expiration, bought approximately 2,400 of the October $9.0 strike calls at an average premium of $0.30 apiece. Investors long the calls make money if the newspaper publisher’s shares surge 15.5% over the current price of $8.05 to trade above the average breakeven price of $9.30 by expiration day. Grist from the rumor mill coupled with increased investor demand for options on NYT boosted the stock’s overall reading of options implied volatility 23.1% to 62.16% by 12:25 pm ET. Earlier in the session, NYT’s reading of implied volatility jumped 44.3% to an intraday high of 72.89%.
