Business Magazine

Bullish Spreads Take Shape In Walgreen Options Ahead Of Earnings

Posted on the 15 December 2011 by Phil's Stock World @philstockworld

WAG - Walgreen Co. – Less than one week remains before Walgreen’s first-quarter earnings report, and a large options trade initiated on the stock this morning prepares one strategist to potentially enjoy big profits should the drugstore chain’s performance send shares skyward. Walgreen Co.’s shares today are up 1.0% at $33.94 in afternoon trade. It looks like the bullish player established a sizable call spread, buying at least 9,200 calls at the Jan. 2012 $35 strike and selling the same number of calls up at the Jan. 2012 $39 strike, all for a net premium outlay of $1.20 per contract. The investor may profit at expiration day next month as long as WAG’s shares rally another 6.7% to surpass the effective breakeven price of $36.20. Maximum possible profits of $2.80 per contract are available to the trader in the event that Walgreen’s shares soar 14.9% to exceed $39.00 at expiration in January.

CS - Credit Suisse Group – Call options on Credit Suisse are more active than usual today on news the financial services provider plans to merge operations of its investment banking and private banking units to lower costs. Shares in the second-largest Swiss bank rallied as much as 3.85% to $23.45 in the first half of the trading session. Fresh prints in Jan. 2012 contract call options indicate some investors are positioning for Credit Suisse Group’s shares to rise as the New Year gets underway. Traders exchanged more than 11,000 calls at the Jan. 2012 $25 strike against open interest of just 79 contracts. It looks like one trader generated much of the volume, buying 5,200 of the call options for an average premium of $0.90 a-pop. The investor stands prepared to profit should the Swiss bank’s shares surge 10.4% to top $25.90 at expiration next month. Bullish players also targeted the Jan. 2012 $23 strike, where 389 in-the-money calls were purchased for an average premium of $1.80 each. Optimism spread to the Jan. 2012 $24 strike as well, with some 1,300 calls purchased at an average premium of $1.30 apiece. Finally, the Jan. 2012 $26 strike saw some 325 call options purchased for a premium of $0.55 per contract.

BMC - BMC Software, Inc. – The most recent six month period has been painful for holders of BMC Software stock, with shares in the name currently trading at a more than 40.0% discount to the July 7, 2011, 52-week high of $56.55. However, options activity on BMC this morning suggests circumstances may be rosier in the New Year. It looks like one trader initiated a bull call spread to position for a rebound in the price of the underlying within the next couple of months. Shares in the software vendor are in the green today, up 0.65% at $33.55, as of 12:10 PM in New York. The strategist appears to have purchased a 1,000-lot Feb. 2012 $34/$37 call spread for a net premium of $1.07 per contract. Profits are available on the spread at expiration in the event that BMC’s shares rally 4.5% to surpass the effective breakeven price of $35.07. The investor may rake in maximum potential profits of $1.93 per contract if shares in BMC Software surge 10.3% to exceed $37.00 at February expiration. The Houston, Texas-based company is scheduled to report third-quarter earnings after the close of trading on February 1, 2012.

NOK - Nokia Corp. – Shares in Nokia Corp. are down 2.2% at $4.91, hovering just $0.07 above its 52-week low of $4.83. A large transaction in July 2012 contract call options launched the mobile phones maker onto our market scanners, and may be one strategist’s move to bet on a Nokia-recovery story in the New Year. It appears one investor purchased 23,500 deep out-of-the-money calls at the July 2012 $8.0 strike for a premium of $0.20 each. The trader may see the value of these contracts rise during the first half of 2012 if shares in Nokia rebound off their current level. But, in order to profit at expiration, shares in Nokia Corp. must jump 67.0% over the current price of $4.91 to exceed the effective breakeven point on the upside at $8.20. Shares in Nokia Corp. last traded above $8.20 in May.

Caitlin Duffy
Equity Options Analyst

Email This Post
 Email This Post  
Bullish Spreads Take Shape In Walgreen Options Ahead Of Earnings
Bullish Spreads Take Shape In Walgreen Options Ahead Of Earnings
Bullish Spreads Take Shape In Walgreen Options Ahead Of Earnings   Google+  

Back to Featured Articles on Logo Paperblog