Real-time equity news [E U]
U.S. stock market report
1615 ET 20Apr2012 Cirrus Logic puts grab interest ahead of
earnings
——————————————————-
———-
Traders accumulating put options on analog chipmaker Cirrus
Logic Inc this week may be looking for potential
bearish movement in the price of the shares ahead of Apple,
Inc’s second-quarter earnings report on Tuesday, and the
Company’s own fourth-quarter release on Wednesday.
Cirrus generates about 70 percent of its revenues from
business with Apple, said Interactive Brokers Group options
analyst Caitlin Duffy. The stock dropped 8.23 percent to $21.07
near the close after rallying briefly at the open on a new ‘Buy’
rating and share price target of $40 by Sterne Agee. But the
stock quickly turned tail as the final trading day of the week
progressed. In all, 12,000 calls and 13,000 puts traded in CRUS,
9.4 times the normal levels, Trade Alert said.
Put open interest in the May expiration has increased over
the past few days, with interest continuing to build in the
contracts on Friday morning, said Duffy. The May $21 strike puts
are among the most heavily traded by volume, with more than
2,100 contracts in play. It appears like one or more traders
purchased the majority of the $21 puts for an average premium of
82 cents in the first half of the trading session, she said.
On Thursday, around 1,100 of these contracts were bought for
60 cents apiece. The erosion in the share price has pumped up
premium on the puts substantially, with one traded price of
$1.15 per contract, up 90 percent overnight and roughly 40
percent since the bulk of the options were purchased on Friday
morning. Put buyers were also active in the May $22 and the May
$24 strikes on Thursday. The value of these bearish puts will
continue to climb if Cirrus shares extend losses through May
expiration. “Some investors might be buying puts to protect
recent gains in the stock ahead of the news. Cirrus is up 43.7
percent year-to-date,” said WhatsTrading.com options strategist
Frederic Ruffy.
Reuters Messaging:
doris.frankel.reuters.com@reuters.net
1445 ET 20Apr2012 Chipotle Mexican May call trades target
gains
—————————————————————
———-
Shares in Chipotle Mexican Grill Inc fell 2.75
percent to $418.92 late on Friday, one day after the upscale
burrito chain reported quarterly profit that beat Wall Street
forecasts.
“But options activity on the stock suggests at least one
strategist is positioning for the shares to potentially hit a
fresh record high in the next few weeks,” said Interactive
Brokers Group options analyst Caitlin Duffy.
Of note is bullish volume building in the May $455 strike
calls and it appears some 1,500 of the contracts were bought on
Friday morning for an average premium of $4.27 apiece, she
added. Call buyers profit at expiration next month as long as
shares surpass the average break-even price of $459.27. The
stock’s all-time high is the April 14 peak of $442.34 Options
volume was 3.7 times the norm with 28,000 puts and 25,000 calls
traded so far, according to Trade Alert.
Reuters Messaging:
doris.frankel.reuters.com@reuters.net
1414 ET 20Apr2012 Goldman Sachs: Hedge Q1 risks in Brazil’s
Unibanco with put spreads
————————————————————–
———-
Put spreads present an attractive hedge into the upcoming
earnings of Ita ? Unibanco Holding , Brazil’s
biggest private-sector bank, said Goldman Sachs Group in a note.
GS derivative strategists recommend buying ITUB May $17-$15
put spreads for 65 cents as they see risks to the bank’s
first-quarter earnings this Tuesday. Selling a May $15 put
reduces the cost of the May $17 put by 19 percent. Put spread
buyers risk losing premium paid if shares close above $17, with
maximum payout potential at $15 or lower.
“We recommend a put spread hedge as our analyst expects any
weakness to be short-lived,” they said. Hedging with put spreads
allows holders to weather a potentially weak quarter, yet still
maintain exposure for an expected rebound in economic activity
and cost efficiencies in the second half 2012. In the near term,
the strategists see potential earnings risks from higher
provision expenses. “Second, lower spreads being charged by
government banks could pressure longer term return potential for
the banks,” they said. “Poor asset quality in particular could
weigh on 1Q2012 results, supporting our view to hedge with May
put spreads.” The strategists estimate that ITUB options are
implying a 4 percent swing on earnings, slightly more than the
median eight-quarter move of 3 percent.
Reuters Messaging:
doris.frankel.reuters.com@reuters.net
1307 ET 20Apr2012 Goldman Sachs: Sell eBay covered calls to
harvest high options prices
————————————————————-
———-
EBay Inc shares surged on Thursday after strong
quarterly results. “This was eBay’s largest rise on earnings
since the second-quarter 2005,” said Goldman Sachs Group
derivative strategists in a note.
While options prices usually drop following earnings events,
eBay’s three-month options prices remain elevated, notably
calls, due to the recent sharp move up in shares. GS derivative
strategists recommend shareholders take advantage of the move
and the persistently high premiums to sell covered calls to
generate yield. Specifically, they recommend selling July $44
EBAY calls to collect $1.07 for limiting upside exposure to a
gain of 11 percent over the next three months. “This 11 percent
return would represent two-thirds of the upside to our price
target in just one-fourth of the time,” Goldman said. Call
sellers risk their stock being called away at the strike price.
Goldman is still bullish on eBay shares as valuation is
attractive and longer term secular growth is strong. But the
strategists do not see major catalysts in the next two months
that would potentially drive the unusually high volatility
priced into options. “We see the potential for an earnings beat
next quarter and would reassess the strategy before earnings,”
they said. “We see the next major catalyst as earnings in July
and recommend holders of EBAY sell covered calls to collect an
elevated premium.” EBay’s three-month at-the-money implied
volatility is flat over the past three days despite the passing
of earnings. While July options may capture the next earnings
report, Goldman expects options prices to decay over the next
two months as the stock stabilizes at these higher levels.
Reuters Messaging:
doris.frankel.reuters.com@reuters.net
1105 ET 20Apr2012 MKM recommends Qualcomm July call spreads
———————————————————–
———-
MKM Partners recommends Qualcomm Inc’s July $65-$70
call spreads for $1.32 based on a stock reference price of
$62.56 to position for upside. The trade would have a maximum
potential gain of $3.68 per contract with stock $70 or higher at
expiration. The three-month skew is near multi-year lows which
makes call spreads an attractive structure for long directional
exposure and would partially offset the stock biding its time
around current levels for a short period, said MKM derivatives
strategist Jim Strugger in a note. Qualcomm shares slid 6.6
percent to $62.56 on Thursday, one day after it warned of
trouble meeting demand for some of its chips..
MKM Semiconductor Analyst Dan Berenbaum believes that long
directional exposure should be added into this weakness and with
skew near multi-year lows, MKM recommends the call spreads.
The company provided a disappointing outlook due to supply
constraints despite reporting solid first-quarter earnings, MKM
said. MKM Berenbaum maintains his 12-month price target of $71.
“While he believes Qualcomm could consolidate around current
levels in the short term, he expects the stock to move higher in
anticipation of the supply constraint issues being resolved
amidst ongoing strong demand,” MKM said.
Reuters Messaging:
doris.frankel.reuters.com@reuters.net
1020 ET 20Apr2012 Susquehanna recaps key option trades this week
—————————————————————
Between earnings reports, M&A; news, and biopharma trial
data, big movers on Thursday were plentiful, said derivative
strategists at Susquehanna Financial Group in a report.
In eBay, which rose about 13 percent on earnings, option
traders were employing various strategies but overall volatility
was mostly bid throughout Thursday, they said.
Following the news that Human Genome Sciences
rejected an unsolicited bid from partner GlaxoSmithKline
, calls and puts of the former traded over 20 times and
30 times their 20-day average daily volume. Some
of the order flow in Human Genome involved an investor selling
May $7 calls as a closing position to buy May $12 calls.
Also there were opening sellers of both the May $13 calls and
May $13 puts, and opening two-way trading in the $14 line.
In biotech Gilead Sciences, which announced
positive phase 2 trial results, profit takers were seen with
investors closing calls after the stock gained 12 percent.
Gilead activity included a closing seller of the May $48-$52
call spread and August $50 calls, SFG said. On Thursday, ahead
of next week’s earnings in Safeway, investors bought May
volatility, SFG said. For instance, ahead of Friday’s April
expiration, an investor bought a 4,000 April-May $22 put
calendar, while separately an investor bought 3,500 May $24
calls, delta neutral. Finally, after seeing a notable amount of
put buying in the homebuilder equities in recent weeks, SFG
noted an increased focus on calls on Thursday with investors
taking a speculatively bullish view, or possibly hedging short
stock. In KB Home an opening investor bought 4,000 May
$8-$9 call spreads for 21 cents. In D.R. Horton, an
investor bought about 5,000 May $16 calls, and separately an
investor bought 7,500 May $15 calls for 63 cents versus selling
755,000 shares at $14.68, the strategists said.
Reuters Messaging:
doris.frankel.reuters.com@reuters.net
0628 ET 20April2012-Economic and earnings diary for April 20
————————————————————
Companies scheduled to report quarterly results on Friday
include General Electric Co, Honeywell,
McDonald’s Corp and Kimberly-Clark.
There are no major economic indicators on tap.
Reuters Messaging:
@reuters.net
