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1315 ET 28Oct2009 Goldman Sachs recommends Starbucks call spreads

Investors should consider buying Starbucks Corp call spreads ahead of Nov. 5 earnings, wrote Goldman Sachs derivative strategists in a note. 'Shares are at the lower end of their three-month range and we expect above consensus earnings,' they said. With shares at $19.09, they recommend investors buy SBUX Nov $20/$22 call spreads for 37 cents to position for upside in a range at reduced cost and moderately long implied volatility. The trade profits at expiration if shares top $20.37 with a best case payout of 5:1. They also estimate shares need to move about 5 percent on earnings, assuming a 10 percent decline in volatility and that options imply a plus/minus 5 percent move on earnings. Starbucks one-month implied volatility has dropped vs. consumer discretionary peers and the overall market in the past weeks but remains above average in relative terms, the note said.

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1255 ET 28Oct2009
Goldman Sachs suggests selling Cisco strangles

Sell Cisco Systems strangles ahead of Nov. 4 earnings, Goldman Sachs derivative strategists wrote in a note. To enhance return, they recommend shareholders sell Nov $23/$25 strangles for 80 cents. With shares at $23.55, the strategy positions short implied volatility with breakevens of $22.80 and $25.80 through Nov. 20 expiration in exchange for the commitment to buy/sell shares at $23/$25 at expiration. Investors can also consider selling Dec $25 covered calls for 50 cents, while retaining 9 percent upside through year-end.

Goldman estimates Cisco options imply a plus/minus 4.5 percent move on earnings vs an 8-quarter median realized stock swing of 3 percent. The strategists expect earnings to be solid but not stock moving and prefer selling options with implied volatility at a large premium to recent realized and Nasdaq 100 option prices.

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1242 ET 28Oct2009
Brazilian ADRs slide with Bovespa as risk appetite wanes

New York-traded shares of Brazilian companies tumbled on Wednesday, on par with Sao Paulo's Bovespa index, as concerns about the strength of the global economic recovery drove investors away from risky emerging-market equities.

The Bovespa index fell 4 percent and the Bank of New York Mellon index of Brazilian ADRs tumbled 5.3 percent, its largest percentage slide in more than four months. A stronger U.S. dollar put extra selling pressure on greenback-denominated foreign equities.

Among top decliners were ADRs of Itau Unibanco, down 6.5 percent at $19.16.

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1229 ET 28Oct2009
Traders favor Nucor put options

Shares of U.S. steelmaker Nucor Corp fell 2.75 percent to $39.89 in afternoon trade, falling in sympathy with a disappointing forecast from ArcelorMittal, said WhatsTrading.com option strategist Frederic Ruffy.

ArcelorMittal, the world's largest steelmaker, dampened recovery expectations with a muted forecast for the final three months of 2009 after a return to profit in the third quarter.

In the options market, bearish sentiment prevailed in Nucor as about 14,000 puts traded vs. 9,434 calls, a combined daily volume double the norm, according to Trade Alert. Ruffy noticed morning trades included a sweep of 4,921 NUE Jan
2010 $38 puts, traded at the offer for $1.95 and data indicated a non
customer or firm buyer. The January $39 and $40 puts also attracted interest, as some investors might be bracing for a pullback in Nucor shares during the final two months of 2009, he said.

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1221 ET 28Oct2009
U.S. manufacturers more optimistic: survey

More U.S. manufacturers are optimistic about the economy, but poor demand remains a top concern, according to a survey.

Forty-eight percent of U.S.-based industrial manufacturers surveyed by PricewaterhouseCoopers in the third quarter said they were optimistic about the U.S. economy over the next year, while only 43 percent had said so in the second quarter.

The largest number of manufacturers polled -- 45 percent -- did not expect their businesses to regain strength until the second half of 2010, the survey showed.

For details, see

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1152 ET 28Oct2009
Vitamin Shoppe rallies in trading debut

Shares of Vitamin Shoppe Inc rallied in their trading debut on Wednesday, after the company's initial public offering priced above expectations.

The shares were priced at $17, above the expected range of $14 to $16.

The company is the first retailer to go public in two years.

For details, see

The stock climbed 9.4 percent to $18.60.

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1144 ET 28Oct2009
GE to cut around 2,700 jobs in Hungary

General Electric on Wednesday said it would cut about 2,700 jobs in Hungary over two years, mostly at its lighting unit. GE employs about 14,000 workers in Hungary. For details, see

Shares of GE, a Dow component, fell 2.8 percent to $14.51.

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