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U.S. stock market report
1729 ET 20May2009
Financial ETF attracts bearish put trade
Shares of the Financial Select Sector SPDR exchange-traded fund fell 2.66 percent to $11.71. In the options market, a number of high-roller option investors pumped up the fund's volume. Andrew Wilkinson, senior market analyst at Interactive Brokers Group said one transaction that grabbed his attention occurred in the July contract. 'It appears that one banking sector-bear sold 21,000 calls at the July $13 strike price for 54 cents each in order to finance the purchase of 21,000 puts at the July $11 strike for an average premium of 71 cents,' he said. The net cost of the protective puts was 17 cents and yields profits to the downside starting at any share price below the break even point at $10.83. He noted the investor would require that shares of the ETF fall another 9 percent from the reference price of $11.90 so that profits from the long-put position would build by expiration. The XLF was trading below $10.70 back in May and it appears the put buyer sees shares falling back down by expiration, he said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1606 ET 20May2009-US STOCKS SNAPSHOT
Financials, Fed caution sink Wall St
U.S. stocks fell on Wednesday, as financial shares sold off following their recent run-up and as the Federal Reserve offered a more pessimistic view on the economy's prospects.
For more details, see
Reuters Messaging: ellis.mnyandu.reuters.com@reuters.net
1338 ET 20May2008
Goldman suggests sell Intuit June straddles before earns
Sell Intuit Inc June straddles to capture elevated option prices and position short implied volatility, Goldman Sachs option strategists said in a note. Intuit is due to report quarterly earnings today. 'We see balanced risk/reward ahead of earnings given the strong position of the company's tax business but strong macro headwinds,' they said. 'Valuation is broadly in line with peers and the recent mid-quarter update should reduce the impact of reported numbers.' But they noted implied volatility screens high versus Goldman's software coverage and is at an 8-point premium to recent realized. The strategists recommend shareholders sell Intuit June $25 straddles for $2.15. With shares at $25.16, the strategy generates attractive upfront premium, positions short volatility and breaks even at $22.85 and $27.15 with the risk of committing to buy or sell shares at $25 at expiration. Goldman estimates Intuit options imply a plus/minus 8 percent move on earnings vs. an eight-quarter median swing of 4 percent.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1309 ET 20May2009
Goldman favors Boeing July calls, positive catalysts ahead
Boeing Co calls look attractive as industry conferences and 787 Dreamliner events in the next two months should act as positive catalysts for the Aerospace sector and Boeing, Goldman Sachs option strategists said in a note. 'We expect 787 first flight in June and improving order trends to drive upside and recommend buying Boeing calls to position with limited risk, given the still difficult operating environment and stock-specific headwinds,' they said. Implied volatility has moved lower but skew is above its one-year average. With shares at $44.62, they suggest investors purchase July $45 calls for $2.40. The strategy provides upside participation 1 percent above current levels, positions long volatility at attractive levels and breaks even if shares rise 6 percent at expiration. Call buyers lose their entire premium invested if shares stay below $45 by expiration, they said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1252 ET 20May2009-May VIX futures settle at 27.04
analyst
May VIX futures settled at 27.04, the lowest settlement level since last August and a level off which the May VIX options will be priced at expiration, said Chris McKhann, analyst at optionMonster.com in comments on the firm's Website. The June VIX futures contracts earlier sat at 29.5, with the rest of the futures above 30. This a 'normal' term structure for a bullish S&P 500, 'but will raise concern if the spot value jumps back above the front month future,' he said. Wednesday marks the settlement of May futures and options on the CBOE Volatility Index. The so-called VIX fell 1.11 percent to 28.51 after midday as the underlying S&P 500 index pared gains.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1240 ET 20May2009
GM June $1 calls become popular
Options players zoomed in on General Motors June $1 calls as more than 33,400 contracts traded against open interest of 129,290 lots. Earlier in the session, more than 12,300 contracts traded in that strike with almost 75 percent traded ask-side, said WhatsTrading.com options strategist Frederic Ruffy. GM shares rose 20 cents to $1.47 and it looks like call buyers are taking positions in the automaker after the Detroit News reported the Treasury Department will invest another $7.5 billion in lender GMAC LLC --two weeks before the GM restructuring plan deadline, he added. Ruffy noted GM's option implied volatility was extreme and on the rise.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1212 ET 20May2009
Rising market may be poised for pullback
Recent stock market gains may not be sustainable. 'I think we are at a 'give up' stage for the bears, and that is bearish,' said Jay Shartsis, director of option trading at R.F. Lafferty & Co Inc in a note. He cites several reasons for that view. First the CBOE Volatility Index has dropped from 32.91 on Monday to a low of 26.57 on Wednesday, a 24 percent move. Next, the June VIX futures is trading at a big premium to the cash VIX, which strongly suggests the VIX will rise and stocks will fall. In addition, data from the CBOE and International Securities Exchange are reflecting quite high levels of call buying and 'further supports the give up by the bears.' He added: 'It is possible that the S&P will make a new high over the 930 level and then go into a dive, but that may not happen. I think we are now close, maybe a day away from a good sell point.'
Reuters Messaging: doris.frankel.reuters.com@reuters.net Keywords: MARKETS STOCKSNEWS
COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
U.S. stock market report
1729 ET 20May2009
Financial ETF attracts bearish put trade
Shares of the Financial Select Sector SPDR exchange-traded fund fell 2.66 percent to $11.71. In the options market, a number of high-roller option investors pumped up the fund's volume. Andrew Wilkinson, senior market analyst at Interactive Brokers Group said one transaction that grabbed his attention occurred in the July contract. 'It appears that one banking sector-bear sold 21,000 calls at the July $13 strike price for 54 cents each in order to finance the purchase of 21,000 puts at the July $11 strike for an average premium of 71 cents,' he said. The net cost of the protective puts was 17 cents and yields profits to the downside starting at any share price below the break even point at $10.83. He noted the investor would require that shares of the ETF fall another 9 percent from the reference price of $11.90 so that profits from the long-put position would build by expiration. The XLF was trading below $10.70 back in May and it appears the put buyer sees shares falling back down by expiration, he said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1606 ET 20May2009-US STOCKS SNAPSHOT
Financials, Fed caution sink Wall St
U.S. stocks fell on Wednesday, as financial shares sold off following their recent run-up and as the Federal Reserve offered a more pessimistic view on the economy's prospects.
For more details, see
Reuters Messaging: ellis.mnyandu.reuters.com@reuters.net
1338 ET 20May2008
Goldman suggests sell Intuit June straddles before earns
Sell Intuit Inc June straddles to capture elevated option prices and position short implied volatility, Goldman Sachs option strategists said in a note. Intuit is due to report quarterly earnings today. 'We see balanced risk/reward ahead of earnings given the strong position of the company's tax business but strong macro headwinds,' they said. 'Valuation is broadly in line with peers and the recent mid-quarter update should reduce the impact of reported numbers.' But they noted implied volatility screens high versus Goldman's software coverage and is at an 8-point premium to recent realized. The strategists recommend shareholders sell Intuit June $25 straddles for $2.15. With shares at $25.16, the strategy generates attractive upfront premium, positions short volatility and breaks even at $22.85 and $27.15 with the risk of committing to buy or sell shares at $25 at expiration. Goldman estimates Intuit options imply a plus/minus 8 percent move on earnings vs. an eight-quarter median swing of 4 percent.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1309 ET 20May2009
Goldman favors Boeing July calls, positive catalysts ahead
Boeing Co calls look attractive as industry conferences and 787 Dreamliner events in the next two months should act as positive catalysts for the Aerospace sector and Boeing, Goldman Sachs option strategists said in a note. 'We expect 787 first flight in June and improving order trends to drive upside and recommend buying Boeing calls to position with limited risk, given the still difficult operating environment and stock-specific headwinds,' they said. Implied volatility has moved lower but skew is above its one-year average. With shares at $44.62, they suggest investors purchase July $45 calls for $2.40. The strategy provides upside participation 1 percent above current levels, positions long volatility at attractive levels and breaks even if shares rise 6 percent at expiration. Call buyers lose their entire premium invested if shares stay below $45 by expiration, they said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1252 ET 20May2009-May VIX futures settle at 27.04
analyst
May VIX futures settled at 27.04, the lowest settlement level since last August and a level off which the May VIX options will be priced at expiration, said Chris McKhann, analyst at optionMonster.com in comments on the firm's Website. The June VIX futures contracts earlier sat at 29.5, with the rest of the futures above 30. This a 'normal' term structure for a bullish S&P 500, 'but will raise concern if the spot value jumps back above the front month future,' he said. Wednesday marks the settlement of May futures and options on the CBOE Volatility Index. The so-called VIX fell 1.11 percent to 28.51 after midday as the underlying S&P 500 index pared gains.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1240 ET 20May2009
GM June $1 calls become popular
Options players zoomed in on General Motors June $1 calls as more than 33,400 contracts traded against open interest of 129,290 lots. Earlier in the session, more than 12,300 contracts traded in that strike with almost 75 percent traded ask-side, said WhatsTrading.com options strategist Frederic Ruffy. GM shares rose 20 cents to $1.47 and it looks like call buyers are taking positions in the automaker after the Detroit News reported the Treasury Department will invest another $7.5 billion in lender GMAC LLC --two weeks before the GM restructuring plan deadline, he added. Ruffy noted GM's option implied volatility was extreme and on the rise.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1212 ET 20May2009
Rising market may be poised for pullback
Recent stock market gains may not be sustainable. 'I think we are at a 'give up' stage for the bears, and that is bearish,' said Jay Shartsis, director of option trading at R.F. Lafferty & Co Inc in a note. He cites several reasons for that view. First the CBOE Volatility Index has dropped from 32.91 on Monday to a low of 26.57 on Wednesday, a 24 percent move. Next, the June VIX futures is trading at a big premium to the cash VIX, which strongly suggests the VIX will rise and stocks will fall. In addition, data from the CBOE and International Securities Exchange are reflecting quite high levels of call buying and 'further supports the give up by the bears.' He added: 'It is possible that the S&P will make a new high over the 930 level and then go into a dive, but that may not happen. I think we are now close, maybe a day away from a good sell point.'
Reuters Messaging: doris.frankel.reuters.com@reuters.net Keywords: MARKETS STOCKSNEWS
COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.