Today’s tickers: PCLN, DFS, DNA, HBC, ref="http://www.bestwaytoinvest.com/quote/CAT">CAT & CX
PCLN – Priceline.com – Shares in online retailer have been on the rise for about the last week rising today to $71.33. For a stock whose option open interest measures just 110,000 contracts, today’s trading marks a busy day. Both January and April contracts saw large volume involving three option legs, but from what we can piece together it appears that bullish patterns were evident. In the January contract for instance, an investor sold 3,750 put options at the well out-of-the-money 45 strike at 30 cents. Simultaneously the investor purchased twice as many call options at the 70 strike costing 4.60 while selling 1,200 calls at the neighboring 75 strike for a 2.60 premium. Overall the investor is net long and hopes the stock continues to rise. The pattern was a little less clear in the January contract but the 45 puts were sold against the 85 strike calls. The trading took place while shares were actually lower on the session at $69.15 before the option pattern possibly sent trade facilitators scurrying to cover net short positions via the stock.
DFS – Discover Financial – Along with its announcement of higher than expected quarterly profits, the credit card company said it had applied to the Fed for bank holding status and that it was seeking to participate in the Treasury Capital Purchase Program. That sent shares in the company 14.2% higher by lunchtime to $9.80 and took some of the pressure off option prices thanks to a decline in option implied volatility, which dropped 6 points to 118%. Option traders, however, were less convinces that the rebound would have staying power and sold calls in the January contract at the 10.0 strike receiving 1.10 for the risk they now bear. But they were also keen to buy protection against a further deterioration in this climate of a slowdown in spending and rising in delinquencies, where the government is toying with plans to protect consumers from the lenders cutting back on amounts they lend while they squeeze customers with higher rates. Option traders bought both 7.5 and 10.0 strikes at 60 cents and 1.50 premiums.
DNA – Genentech Inc. – We saw little news to explain the presence of Genetech in our market scanners this morning, where option volume at the December 80 strike puts of 5,000 matched volume trading at the January 85 strike. Today shares in…
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