This is a rebroadcast of OICs webinar panel. In this deep dive discussion, Frank Fahey (representing...
Two Option Trades to Watch
11/19/2009 12:01 am EST
Calendar Spread on Sina Corp (SINA)
An investor placed a calendar call spread using call options expiring in January and March in hopes of capturing further gains on the surge in shares of online Chinese media portal Sina Corp. (SINA). Earlier, the company beat earnings on solid advertising revenues, topping a 31-cent estimate with an actual 34-cent-per-share performance. The share price jumped through its 52-week high and is currently higher by 10% at $47.20, although today’s noteworthy options took place when shares were trading at $46.75.
The investor bought more than 3,000 calls at the January 45 strike, paying a 4.20 premium, while simultaneously selling the identical amount of March calls at the 50 strike for a 3.20 premium. The trader is essentially long at a vastly reduced one-point premium, rather than 4.20 points. The maximum profit on the trade is that five-point spread between the two call strikes, less the net premium paid, or four points in the event the share price continues to or above $50 by the spring.
Exxon Mobil Corp. (XOM) Sees Heavy Option Buying
Analyst upgrades and reports that Warren Buffett’s Berkshire Hathaway, Inc. has increased its stake in XOM inspired a flurry of options activity on the oil and gas company today. Shares of Exxon Mobil are 0.5% higher at lunch time to stand at $74.82. Bullish signals on XOM are an upgrade to “overweight” from “equal weight” with a $92.00 share price target at Barclays, as well Berkshire Hathaway’s buying spree.
One option trader increased bullish sentiment on the stock by rolling a long call position forward to a higher strike price. The investor sold 10,000 calls at the January 2010 75 strike for 2.45 each, and purchased the same number of calls at the higher April 80 strike for 1.95 apiece. We’re going out on a limb here and suggesting that this trader held an established long position and now expects greater things from Exxon. It looks like the same investor also traded 10,000 puts at the April 70 strike for 2.66 each. The trader may have purchased the puts as downside protection, or could have sold the contracts to extend his bullish stance.
By the Staff at TheOptionsInsider.com
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