Monday Options Update: LVS, JPM, WNR, PFE, SLW, PCLN & XLK
Andrew Wilkinson submits: Las Vegas Sands Corp. (LVS) – Options strategists are initiating trades on the operator of casino resorts that suggest LVS shares could pull back further off recent highs. One big player wary of bearish movement in the price of the underlying shares purchased a large-volume ratio put spread in the January 2011 contract. Las Vegas Sands’ shares started the session in the red, but recovered this afternoon, and are currently up 1.65% at $52.84 as of 3:20 pm in New York. The put player purchased 20,000 contracts at the January 2011 $52.5 strike for a premium of $5.50 each, and sold 40,000 puts at the lower January 2011 $45 strike at a premium of $2.21 a-pop. Net premium paid to initiate the bearish spread amounts to $1.08 per contract. The investor responsible for the transaction is prepared to make money, or realize downside protection on a long position in the underlying shares, if LVS shares decline 2.7% from the current price of $52.84 to breach the effective breakeven point at $51.42 by January expiration. Maximum potential profits of $6.42 per contract are available to the trader if shares of the casino operator plunge 14.8% lower to settle at $45.00 at expiration. More than 216,000 option contracts have changed hands on LVS with 35 minutes remaining before the final bell. Options implied volatility on the stock is up 4.1% at 57.43%, the highest reading of IV since the end of July. JPMorgan Chase & Co. (JPM) – Shares of the financial services firm fell 0.85% to $40.59 late in the trading session, but earlier today one cautiously optimistic investor initiated a delta neutral hedge using longer-dated put options in the June 2011 contract. It looks like the investor picked up 6,790 puts at the June 2011 $39 strike for a premium of $3.24 each to cover the 271,600 shares purchased at $40.70 on a 0.40 delta. The long position in JPM shares suggests the trader is expecting JPMorgan’s shares to rise over the next 8 months. The put options serve to protect the value of the position in case the price of the underlying stock should falter rather than rally during that time period. More than 8,320 puts changed hands at the June $39 strike today versus paltry previously existing open interest of just 596 contracts. Complete Story »
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