Today’s tickers: NWL, MAS, CX, STX, HBC & HAL
NWL – Newell Rubbermaid Inc. – “The unprecedented rapidity of the economy’s decline makes it difficult to anticipate an economic rebound anytime soon. Our expectations are for a more challenging business environment in 2009 than any we’ve seen to date.” These words could have been picked out of Tuesday’s FOMC statement explaining why they slashed interest rates to the bone. But instead they belong to the CEO at Newell Rubbermaid, where shares have tumbled 26% today to stand at $9.74. Option investors stepped up to place bearish positions on shares in Newell, maker of consumer goods including the Graco brand of baby products as the company announced the loss of 10% of employees at its Atlanta, GA headquarters. Earnings projections for the fourth quarter were slashed from as high as 34 cents to as little as 6 cents per share. Only 36,900 lots of open interest were in place before today’s news, with most established on the call side. Today investors sold calls expiring in January at the 12.5 strike sensing little chance of any rebound. They also bought 2,600 put options expiring Friday at the 10.0 strike where only 230 open positions exist. Puts in the March contract were also bought at the 10.0 strike where investors paid 1.35 to establish 1,500 contracts.
MAS – Masco Corp. – A three-legged option trade jumped out from our market scanner this morning involving 15,000 options apparently instigated by a single investor, who sees through current share price weakness for the home improvement product maker. The trade centers on the January 2010 contract and takes advantage of the fact that shares in the company are trading 3.8% lower today at $10.65. The investor appears to have sold 5,000 put options at the 5.0 strike in order to create premium, which is used to offset the overall cost of a same-size call spread involving the 12.5 and 17.5 strikes. That spread outright costs a premium of 1.25 and would benefit in the event that shares rally out of recession. The breakeven here at $13.75 is further reduced by the 70 cent credit from the put sale to a share price of $13.05. We have observed several similar trading patterns in recent weeks of this style and it suggests that investors are scouring for stocks exhibiting strengths perhaps in specific cash flow or debt profiles, which would weather the…
Did you like this article?
Submitted By 
's
