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U.S. stock market report 1733 ET 09July2009 Goldman suggests Abbott Labs call spreads ahead of earnings
Call spreads in Abbott Laboratories are attractive ahead of the company's earnings due on July 15, said Goldman Sachs derivative strategists in a note this week. 'Stable inventory and positive earnings leverage should support strong 2Q EPS and 2009 guidance while Humira sales could cause upside to estimates and shares given conservative expectations,' the note said. The strategists said option prices are elevated vs. peers and they prefer call spreads for upside with limited loss and attractive payout ratio. With shares at $45.35, they recommend investors purchase ABT Aug $46/50 call spreads for $1.10 and upside exposure from plus 4 percent to plus 13 percent, limited downside and modestly long volatility exposure. Call spread buyers risk losing the entire premium paid.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1720 ET 09July2009
Infosys Tech option volume pops up before earnings
Option volume of about 71,000 contracts in Infosys Technologies was 11 times the norm heading into the company's fiscal first-quarter results due on Friday, according to Trade Alert. U.S.-listed shares of India's second-largest software company rose 20 cents to $34.49. The option turnover started to pop up after a large trade involving a seller of 15,000 July $35 puts was spread against the purchase of 15,000 Aug $40 calls for a net credit of $1.20, said Trade Alert President Henry Schwartz. 'With shares near $34.50 at the time of the trade, the initiator is making a significant bullish bet that pays off best gains if shares lift through the $40 strike,' he said. In addition, the July puts were sold at implied volatility nearly 20 points above the August $40 strike, illustrating the additional premium due to earnings risk, Schwartz added.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1541 ET 09July2009
Option bulls line up for Cisco August calls
Call options are in demand in network equipment maker Cisco Systems Inc with about 45,000 contracts traded compared with 30,000 puts, according to Trade Alert. Its shares rose 6 cents to $18.19 near the close. This morning, the August calls attracted institutional buyers, possibly positioning ahead of Cisco's earnings report due in early August, said Pete Najarian, a founder of optionMonster.com in comments on the website. The August $19 strike had about 16,000 calls bought for an average premium of 65 cents each, said Andrew Wilkinson, market analyst at Interactive Brokers Group in a note. Using a reference share price of $18.21, Cisco shares must rise about 4 percent to the breakeven point at $19.65 for call-buying bulls to profit by expiration. Additional bullish action was observed at the higher August $20 strike price, where 2,000 calls appeared to have been picked up for 30 cents each, he said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1523 ET 09July2009
Barclays suggests AIG option trades for short exposure
Shares of American International Group fell 27.18 percent to $9.54, after a Citigroup analyst said the value of the insurer's equity may fall to zero. AIG shares have sold off more than 50 percent since its 1-for-20 reverse stock split on July 1. In the options market, put volume was aggressive with about 111,000 contracts on the tape, nearly nine times the norm heading into the last hour of trade, according to Trade Alert.
Barclays Capital equity derivative strategists in a note on Wednesday suggest options strategies that give short exposure to AIG for investors who have a negative view on the stock.
They include buying November conversions and risk reversals; Nov $5-$10 put spreads and deep out-of-the-money Feb 2010 $5 puts or January 2011 $2.50 puts. The rationale behind these trades is to lock in a lower effective cost of borrowing the stock and setting up an attractive risk/reward by using derivatives, the note. A conversion is set up by buying stock versus buying a put and selling a call at the same expiration and strike.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1443 ET 09July2009 Option trader takes bullish stance in Amerisource
Drug wholesaler AmerisourceBergen Corp options volume rose after one investor initiated a bullish reversal in the August contract. Late in the afternoon, the stock was unchanged at $17.93 after trading slightly off at $17.78. Hoping for upward movement in the share price by August expiration, the optimistic investor looked to the August $15 strike price to sell 5,000 puts for 15 cents apiece which he spread against the purchase of 5,000 calls at the higher August $20 strike for 20 cents each, said Interactive Brokers Group market analyst Andrew Wilkinson in a note. The transaction cost a nickel per contract. ABC shares must rally 13 percent from a reference price of $17.78 in order for the investor to begin to amass profits at the breakeven point of $20.05, he said. ABC has not breached $20 since Sept 15, 2008. Steve Claussen, chief investment strategist at OptionsHouse said the company is due to report earnings before August expiration and with both options significantly out-of-the-money, the call purchase likely suggests expectations for an outsize move higher,
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1431 ET 09July2009
Recovery close at hand: Fed's Stern
A U.S. economic recovery seems 'close' after a deep and prolonged recession but growth will be modest into next year, Gary Stern, president of the Minneapolis Federal Reserve Bank, said on Thursday.
'I continue to think that improvement in the economy is close at hand,' Stern said in remarks prepared for a speech to business leaders in Helena, Montana, adding 'healthy growth' can be expected from the middle of 2010 and beyond.
Stern played down concerns about 'a potential burst of inflation' as a result of the Fed's policies to backstop credit markets as a threat to the economy. The kind of volatility seen in recent data is often a sign a recovery is on the way, Stern said.
For details, see
Reuters Messaging: ryan.vlastelica.reuters.com@reuters.net
1413 ET 09July2009
Broadpoint AmTech starts coverage on IBM
Broadpoint AmTech on Thursday started coverage on IBM with a 'neutral' rating, saying the company possessed the best global footprint from a hardware, software and service offering perspective to provide the most compelling solutions for next-generation IT infrastructures.
'However, we believe some of the company's offerings might be ahead of their time, thus adoption of some of the company's more strategic offerings could be several years out,' it added. For details, see
Shares of IBM, a Dow component, rose 1.6 percent to $102.25.
Reuters Messaging: ryan.vlastelica.reuters.com@reuters.net
1324 ET 09July2009
TiVo in marketing pact with Best Buy
TiVo Inc announced on Thursday a marketing alliance with retailer Best Buy and will consider putting its television recording technology into Best Buy's own brand of TVs and electronics.
Financial details of the pact were not disclosed.
Under the alliance, Best Buy, the top U.S. specialty consumer electronics retailer, will boost marketing and merchandising of TiVo's digital video recorders. TiVo will give Best Buy 'consistent presence' in a showcase area on TiVo on-screen systems.
Shares of TiVo rose 1.8 percent to $8.76 while Best Buy was up 2.3 percent to $32.96.
Reuters Messaging: ryan.vlastelica.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 1733 ET 09July2009 Goldman suggests Abbott Labs call spreads ahead of earnings
Call spreads in Abbott Laboratories are attractive ahead of the company's earnings due on July 15, said Goldman Sachs derivative strategists in a note this week. 'Stable inventory and positive earnings leverage should support strong 2Q EPS and 2009 guidance while Humira sales could cause upside to estimates and shares given conservative expectations,' the note said. The strategists said option prices are elevated vs. peers and they prefer call spreads for upside with limited loss and attractive payout ratio. With shares at $45.35, they recommend investors purchase ABT Aug $46/50 call spreads for $1.10 and upside exposure from plus 4 percent to plus 13 percent, limited downside and modestly long volatility exposure. Call spread buyers risk losing the entire premium paid.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1720 ET 09July2009
Infosys Tech option volume pops up before earnings
Option volume of about 71,000 contracts in Infosys Technologies was 11 times the norm heading into the company's fiscal first-quarter results due on Friday, according to Trade Alert. U.S.-listed shares of India's second-largest software company rose 20 cents to $34.49. The option turnover started to pop up after a large trade involving a seller of 15,000 July $35 puts was spread against the purchase of 15,000 Aug $40 calls for a net credit of $1.20, said Trade Alert President Henry Schwartz. 'With shares near $34.50 at the time of the trade, the initiator is making a significant bullish bet that pays off best gains if shares lift through the $40 strike,' he said. In addition, the July puts were sold at implied volatility nearly 20 points above the August $40 strike, illustrating the additional premium due to earnings risk, Schwartz added.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1541 ET 09July2009
Option bulls line up for Cisco August calls
Call options are in demand in network equipment maker Cisco Systems Inc with about 45,000 contracts traded compared with 30,000 puts, according to Trade Alert. Its shares rose 6 cents to $18.19 near the close. This morning, the August calls attracted institutional buyers, possibly positioning ahead of Cisco's earnings report due in early August, said Pete Najarian, a founder of optionMonster.com in comments on the website. The August $19 strike had about 16,000 calls bought for an average premium of 65 cents each, said Andrew Wilkinson, market analyst at Interactive Brokers Group in a note. Using a reference share price of $18.21, Cisco shares must rise about 4 percent to the breakeven point at $19.65 for call-buying bulls to profit by expiration. Additional bullish action was observed at the higher August $20 strike price, where 2,000 calls appeared to have been picked up for 30 cents each, he said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1523 ET 09July2009
Barclays suggests AIG option trades for short exposure
Shares of American International Group fell 27.18 percent to $9.54, after a Citigroup analyst said the value of the insurer's equity may fall to zero. AIG shares have sold off more than 50 percent since its 1-for-20 reverse stock split on July 1. In the options market, put volume was aggressive with about 111,000 contracts on the tape, nearly nine times the norm heading into the last hour of trade, according to Trade Alert.
Barclays Capital equity derivative strategists in a note on Wednesday suggest options strategies that give short exposure to AIG for investors who have a negative view on the stock.
They include buying November conversions and risk reversals; Nov $5-$10 put spreads and deep out-of-the-money Feb 2010 $5 puts or January 2011 $2.50 puts. The rationale behind these trades is to lock in a lower effective cost of borrowing the stock and setting up an attractive risk/reward by using derivatives, the note. A conversion is set up by buying stock versus buying a put and selling a call at the same expiration and strike.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1443 ET 09July2009 Option trader takes bullish stance in Amerisource
Drug wholesaler AmerisourceBergen Corp options volume rose after one investor initiated a bullish reversal in the August contract. Late in the afternoon, the stock was unchanged at $17.93 after trading slightly off at $17.78. Hoping for upward movement in the share price by August expiration, the optimistic investor looked to the August $15 strike price to sell 5,000 puts for 15 cents apiece which he spread against the purchase of 5,000 calls at the higher August $20 strike for 20 cents each, said Interactive Brokers Group market analyst Andrew Wilkinson in a note. The transaction cost a nickel per contract. ABC shares must rally 13 percent from a reference price of $17.78 in order for the investor to begin to amass profits at the breakeven point of $20.05, he said. ABC has not breached $20 since Sept 15, 2008. Steve Claussen, chief investment strategist at OptionsHouse said the company is due to report earnings before August expiration and with both options significantly out-of-the-money, the call purchase likely suggests expectations for an outsize move higher,
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1431 ET 09July2009
Recovery close at hand: Fed's Stern
A U.S. economic recovery seems 'close' after a deep and prolonged recession but growth will be modest into next year, Gary Stern, president of the Minneapolis Federal Reserve Bank, said on Thursday.
'I continue to think that improvement in the economy is close at hand,' Stern said in remarks prepared for a speech to business leaders in Helena, Montana, adding 'healthy growth' can be expected from the middle of 2010 and beyond.
Stern played down concerns about 'a potential burst of inflation' as a result of the Fed's policies to backstop credit markets as a threat to the economy. The kind of volatility seen in recent data is often a sign a recovery is on the way, Stern said.
For details, see
Reuters Messaging: ryan.vlastelica.reuters.com@reuters.net
1413 ET 09July2009
Broadpoint AmTech starts coverage on IBM
Broadpoint AmTech on Thursday started coverage on IBM with a 'neutral' rating, saying the company possessed the best global footprint from a hardware, software and service offering perspective to provide the most compelling solutions for next-generation IT infrastructures.
'However, we believe some of the company's offerings might be ahead of their time, thus adoption of some of the company's more strategic offerings could be several years out,' it added. For details, see
Shares of IBM, a Dow component, rose 1.6 percent to $102.25.
Reuters Messaging: ryan.vlastelica.reuters.com@reuters.net
1324 ET 09July2009
TiVo in marketing pact with Best Buy
TiVo Inc announced on Thursday a marketing alliance with retailer Best Buy and will consider putting its television recording technology into Best Buy's own brand of TVs and electronics.
Financial details of the pact were not disclosed.
Under the alliance, Best Buy, the top U.S. specialty consumer electronics retailer, will boost marketing and merchandising of TiVo's digital video recorders. TiVo will give Best Buy 'consistent presence' in a showcase area on TiVo on-screen systems.
Shares of TiVo rose 1.8 percent to $8.76 while Best Buy was up 2.3 percent to $32.96.
Reuters Messaging: ryan.vlastelica.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.