Today's tickers: WYNN, BIDU & XHB

WYNN - Wynn Resorts Limited - The owner and operator of casino resorts posted third-quarter earnings per share of 33 cents - a 33% decline in net income - sending shares 10% lower to $56.75. Wynn Resorts has now reported declines in profit for two consecutive quarters. WYNN's lackluster earnings is weighing heavily on other casino operators such as Las Vegas Sands (-7.5% to $14.88) and MGM Mirage (-8% to $10.08) as of 10:30 am (EDT). Investors have exchanged 22,000 option contracts on WYNN.

BIDU - Baidu, Inc. - Shares of the Chinese language internet search provider are trading 13% lower as of 10:15 am (EDT) to stand at $376.56. The decline in shares seems to contradict the firm's better-than-expected third-quarter earnings of $2.16 per share. However, investors were disappointed by Baidu's forecast for fourth-quarter revenue, which the firm says will likely decline as they transition to a new internet advertising technology. Shares dropped as much as 18% to $355.71 while implied volatility tumbled 16% to 44% following earnings. Approximately 50,000 option contracts - 32% of existing open interest - changed hands by 10:30 am (EDT).

XHB - SPDR S&P Homebuilders ETF - A butterfly spread unfurled its wings in the November contract on the homebuilders ETF within the first 15 minutes of the trading session. Shares of the XHB are lower by 1.5% to $14.58. Perhaps the investor responsible for the trade is expecting shares to rebound by expiration next month. Stay tuned for a more in depth analysis of this transaction...

As of: Monday October 26, 2009 3:50 pm EST

All-time high for Amazon has option traders raising the bar

Today's tickers: AMZN, MU, ETH, AMR, WYN, TBT, BAC, PCS, DE, ING, RSH & BCRX

AMZN - Amazon.com, Inc. - Shares of the online retailer surged to an all-time high of $125.44 during the trading session. Investors exchanged approximately 241,000 option contracts on AMZN by 3:00 pm (EDT), which represents about 41% of the total existing open interest on the stock of 591,993 lots. Bullish investors expecting Amazon to rally even higher purchased 7,000 calls at the November 135 strike for an average premium of 1.84 apiece. Optimism spread to the higher November 140 strike where 2,800 calls were picked up for 1.05 each. Super bullish traders looked to the highest available strike price in the front month - the November 150 strike - to purchase 1,000 calls for an average premium of 31 cents per contract. Shares of Amazon.com rallied 36% to reach today's intraday high of $125.44, climbing up from an intra-week low of $91.98 on Thursday October 22, 2009. Investors holding calls at the November 135 strike will profit by expiration if shares of AMZN gain 9% over the high of $125.44 to breach the breakeven price of $136.84. Finally, near-term put options were also in demand by investors looking to lock in gains enjoyed during Amazon's recent run-up. Traders shelled out an average of 6.92 per contract to buy 3,100 puts at the November 125 strike.

MU - Micron Technology, Inc. - Option traders invested in April contract call options on the semiconductor manufacturer despite the 0.5% decline in shares to $7.41. It appears some 9,200 calls were purchased by MU-optimists at the April 8.0 strike for an average premium of 1.08 per contract. Call-buyers apparently expect shares to rally significantly within the next six months. Investors holding the call options will profit by expiration if shares of MU rally at least 22.5% to the breakeven point at $9.08.

ETH - Ethan Allen Interiors, Inc. - Home-furnishings retailer, Ethan Allen, experienced a more than 14% decline in shares today to $14.30 after the firm forecast a wider-than-expected loss of 21-23 cents for the first quarter. Analysts predicted an 8 cents per share loss before the firm lowered guidance last week. Long-term downside protection is in demand as traders picked up some 5,500 puts at the May 12.5 strike for an average premium of 1.76 apiece. Investors holding long positions in the underlying stock will find protection kicks in if shares slip beneath the lower breakeven point at $10.74. It could be the case that the puts were bought by traders holding no position in the ETH shares. These individuals are merely taking a long-term bearish stance on the stock to potentially profit from further declines. Shares must fall 25% from the current price for ETH-pessimists to bank gains by expiration.

AMR - AMR Corp. - The operator of American Airlines suffered a 6% decline in shares to $5.92 today. The share price erosion inspired some option traders to make bearish moves on the stock. Approximately 8,200 puts were scooped up at the December 6.0 strike for 61 cents per contract. Investors who do not hold a position in the underlying stock are probably looking to amass profits on further bearish movement in the price of shares. In this case, profits will begin to amass if shares decline through the breakeven point to the downside at $5.39. Option implied volatility rose 13% during the session to an intraday high of 69%.

WYN - Wyndham Worldwide Corp. - A buy-write strategy initiated in the November contract this morning indicates near-term bullish sentiment on the hospitality company despite the 1.25% decline in shares today to $16.98. It appears the investor responsible for the trade established the covered call by selling approximately 11,000 calls at the November 17.5 strike for 1.23 apiece while simultaneously purchasing an equivalent number of shares of the underlying stock. The trader effectively reduced the cost of buying WYN shares from $16.98 to approximately $15.75 by selling the call options. If shares of Wyndham rally above $17.50 by expiration the investor will have the underlying shares called away. Should this scenario play out, the trader will walk away with profits of about 1.75 per contract, or gains of 11% on the rally in shares to $17.50.

TBT - ProShares Ultrashort Lehman 20+ Year Bond ETF - It's been over a month since treasury yields were last above 3.5% at the 10-year area of the yield curve. That means that shares in TBT have been lackluster given the inverse relationship between the yield on government bonds and the price of shares of the exchange traded fund. Today its share price is up, but given back earlier in the day gains to $48.06 and currently stands at $47.15. Option traders added to an outstanding reading of open interest of 8,847 contracts at the November expiration 50 strike calls, which augurs badly for yields into expiration next month. Bond investors are fixated with two negatives today. The market is preparing for a rebound in third quarter U.S. GDP later this week. Second, a Wall Street Journal article expects FOMC members to address the need to raise interest rates rather than leave the pause in monetary policy open-ended. The talk of interest rate increases itself is enough to send bond prices down ahead of next week's meeting. Some 11,000 calls were traded at the November 50 strike making up around one quarter of today's volume.

BAC - Bank of America - January put options at the 14 strike were in significant demand right after the opening bell on Monday as investors bought 22,700 contracts within the first 15 minutes of trading. A premium of 64 cents secured one order for 16,000 contract at the time. Shares in the banker slipped almost 6% by noon to stand at $15.25 and pushing up the protective put premiums to 88 cents during the morning. A mid-morning turnaround in financial share prices turned the equity benchmark indices negative after a promising start. As we conclude this lunch-time round-up we note a block of 20,000 January calls spreads at the 16/17 strikes in BAC bought for a net 50 cents. The same spread on Friday was available at a net premium of 66 cents.

PCS - MetroPCS Communications, Inc. - Shares of MetroPCS are up less than 0.5% to $6.66 today, but bullish options activity in the May contract suggests investors expect more significant gains in the stock by expiration. Investors taking an optimistic stance on PCS purchased approximately 18,500 call options at the May 10 strike for an average premium of 60 cents apiece. The plain-vanilla call-buying at this strike indicates traders hope to see shares rally about 59% from the current price to the breakeven point at $10.60 by expiration in May. Perhaps investors are positioning for the potential surge in shares that is likely to occur if PCS is acquired by larger rival firms.

DE - Deere & Co. - The manufacturer of agricultural equipment and commercial vehicles attracted bullish option traders to invest in out-of-the-money call options. Shares of DE are trading approximately 1% higher to stand at $48.44. Near-term optimists picked up about 3,200 calls at the November 55 strike for an average premium of 29 cents each. Traders holding these contracts may accrue profits ahead of expiration next month if shares rally at least 14% to surpass the breakeven price of $55.29. Bullish sentiment spread to the December 55 strike where 4,100 calls were purchased for about 95 cents apiece. A 15.5% rally in the stock by December's expiration will ensure call-buyers breakeven at a share price of $55.95. We note that for any of the call-buying investors to profit the stock must explode through the current 52-week high of $49.68 attained on October 21, 2009. Shares of DE last traded above $55.00 on September 26, 2008.

ING - ING Groep NV - Shares of the Dutch financial services company are hurting this morning - down 12.5% to $15.20 - after announcing plans to raise $11.3 billion in a share issue. ING also intends to divide up its insurance and banking businesses. News of the share issue scheduled for November 25 sent shares lower and investor uncertainty higher. Implied volatility jumped roughly 16% to 66.5% as of 10:00 am (EDT). Investors exchanged 4,100 option contracts on ING within the first half hour of the trading session. The morning's option volume represents approximately 30% of the stock's total existing open interest of 13,346 contracts.

RSH - RadioShack Corp. - Consumer electronics retailer, RadioShack, met analyst expectations by posting third-quarter profits of 30 cents per share this morning. Shares of RSH are soaring nearly 13% higher to $17.67 - a new 52-week high - following the earnings announcement. Implied volatility is on the decline, having fallen 24.71% to 41.70%, thus far in the session. Option traders are exchanging RadioShack call options at two times the rate of put options.

BCRX - Biocryst Pharmaceuticals, Inc. - Call options are in high demand on the biotechnology company. Shares are up 13.5% to $10.97 perhaps following Friday night's news that the U.S. Food and Drug Administration (FDA) issued an emergency use authorization (EUA) for BCRX's investigational anti-viral drug intravenous peramivir in certain patients admitted to a hospital with either confirmed or suspected H1N1 infection. More than 30,800 option contracts changed hands on the stock by 10:20 am (EDT). Option implied volatility crashed to 88% -- a one year low for BCRX - from 106% at the start of the trading day.