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Sharp Rally A Boon To Citrix Systems Call Buyer

Posted on the 27 October 2011 by Phil's Stock World @philstockworld

CTXS - Citrix Systems, Inc. – Shares in Citrix Systems, Inc. rallied to their highest level since the end of July after the company reported third-quarter earnings and fourth-quarter estimates that beat expectations. The stock currently trades 15.2% higher on the session at $73.99, after soaring as much as 21.5% to an intraday high of $78.00. Huge gains in the price of the software maker’s shares appears to have worked out nicely for one options player who may be taking profits off the table today. Citrix call activity spiked in the first 30 minutes of the session after large numbers of deep in-the-money and out-of-the-money calls changed hands in the November contract. It looks like the investor may have snapped up around 4,875 calls at the Nov. $65 strike for a premium of $4.10 each back on October 18, when shares in Citrix closed the day at $64.50. The massive rally in the price of the underlying stock today more than doubled premium required to purchase Nov. $65 call options. The investor appears to have sold the batch of calls purchased on Oct. 18 this morning for an average premium of $11.07 per contract. Average net profits on the sale amount to $6.97 per contract. Finally, the sale of the call options was tied to the opening purchase of roughly 4,800 Nov. $75 strike calls for an average premium of $3.93 apiece. The fresh bullish stance may be profitable if shares in Citrix Systems extend gains through expiration next month. Profits are available on the new position if shares in CTXS increase another 6.6% over the current price of $73.99 to surpass the average breakeven point at $78.93 at expiration day. Options implied volatility on the stock fell 19.3% to a two-month low of 45.35% this afternoon.

XOP - SPDR S&P Oil & Gas Exploration & Production ETF – The buyer of a large batch of put options on the XOP may have cut his losses this morning on the heels of a more than 8.0% rally in the price of the underlying since the bearish position was initiated. Shares in the XOP, an exchange-traded fund that tracks the performance of an index derived from the oil and gas exploration and production segment of a U.S. total market composite index, are up 4.9% today at $55.85 just before 1:00 pm EDT. On Tuesday, options volume at the Nov. $50 strike jumped after one strategist purchased 29,300 puts at a premium of $1.93 per contract. Premium on the put options rose to as high as $2.41 each on Wednesday, but plunged on Thursday as markets soared on signs Europe is finally getting it together. The put buyer may have originally secured the position to speculate on a pullback in shares of the fund, hedge exposure to the sector, or protect the value of a long position in XOP shares should the fund decline. The way things are shaping up today, it seems such protection was unnecessary. It looks like the investor sold the puts today for $0.90 a-pop. Net losses on the closing-sale, in isolation, are painful at $1.03 per contract. But, any upside exposure the put buyer may have had to the sector or the fund itself could have potentially offset losses felt on the options.

HL - Hecla Mining Co. – Shares in the mining company are up 7.5% to stand at $6.30 as of 1:40 pm EDT, on an up-up-and-away kind of day for U.S. equities. Hecla Mining Co. popped up on our ‘hot by options volume’ market scanner following a burst of activity in December contract calls. Options traders exchanged more than 23,000 calls at the Dec. $6.0 strike this morning against open interest of 3,315 positions. It looks like most of these in-the-money calls were purchased for an average premium of $0.63 apiece. Buyers of the contracts may profit at expiration in the event that shares in Hecla increase another 5.4% to surpass the average breakeven price of $6.63 by expiration day in December. The intraday value of these put options has already created a positive scenario for buyers of the calls, with premium required to purchase the Dec. $6.0 strike call up 10 cents on the session at $0.73 each as of 1:45 pm in New York. Shares in Hecla Mining last traded above $6.63 back on September 22. The company is schedule to report third-quarter earnings ahead of the opening bell on November 8.

Caitlin Duffy
Equity Options Analyst

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