Today's tickers: CVC, CX, ALL & VALE
CVC Cablevision Systems Corporation – Shares of the cable operator have climbed by more than 2.5% to $18.84 after reporting that first-quarter revenue increased by 10.6% to $1.903 billion. We observed bullish activity on the stock by investors looking for continued upward movement in share price. The May 20 strike had some 4,900 calls coveted for an average premium of 97 cents apiece. Further up at the May 22.5 strike price, about 1,300 calls were bought for 29 cents per contract. Finally, individuals looking for near-term downside protection targeted the May 15 strike price to pick up about 1,400 put options for an average premium of 22 cents each. Option implied volatility on the stock surged from 53% at the start of the trading day up to as high as 71% before dropping of a bit to the current value of 69%.
CX Cemex SAB de CV ADS – The provider of ready-mix cement and other construction materials has declined by more than 3.5% to $10.00. One bearish investor sees shares continuing to decline in the medium-term and today established a ratio credit spread in the July contract in the magnitude of two-to-three. It appears that he sold 17,500 calls at the July 7.5 strike price for a premium of 3.30 apiece and simultaneously purchased 24,500 calls at the July 10 strike for 1.65 each. The investor retains the credit as long as shares remain below $10.00 by expiration. Since he is long more calls at the July 10 strike than he is short at the July 7.5 strike, should shares rally hard the position will effectively leave him long of calls. Thus, if shares should rally rather than fall by expiration, he would begin to profit on the upside on the 7,000 lot call position.
ALL The Allstate Corporation – The insurance giant's shares have jumped more than 8.5% to $28.00 ahead of its first-quarter earnings report set for release after the market closes this evening. The bullish rise in shares is on the heels of stronger than expected earnings reported by its competitor, Prudential (PRU). ALL leapt onto our ‘most active by options volume' market scanner after one investor initiated a large-volume calendar spread. It appears that the individual sold 30,000 calls at the October 35 strike price for 1.35 in order to finance the purchase of 30,000 now in-the-money calls at the near-term May 27.5 strike for 1.40 apiece. The spread essentially provides the opportunity for this investor to take delivery of shares if the calls of which he is long remain in-the-money at expiration day. Should this scenario come to fruition, he has effectively established a covered call by holding a short position at the higher October 35 strike price. He paid a net cost of a nickel for the trade and is prepared to earn gains on the long stock position up to $35.00. If shares breach $35.00, he will have earned approximate gains of 27% on the stock at which point he is prepared to have the shares called away from him at expiration.
VALE Companhia Vale do Rio Doce ADS – The world's largest iron-ore producer has slipped by about 4% to stand at $18.20 amid reports that global investment in the mining industry may decline by some $60 billion this year. VALE recorded a 33% decline in net income to $1.36 billion for the first-quarter, its third straight decline in quarterly profit, citing slumps in sales and iron-ore output. In line with the bearish news, we observed put buying on the stock today. The June 18 strike price had 10,000 puts trade to the middle of the market, but it is likely that they were purchased at a premium of 1.26 apiece. Further along, a more bearish medium-term investor picked up 9,000 puts at the September 15 strike price for 1.15 per contract. The September 15 puts will yield profits to the downside beginning at the breakeven point of $13.85 – a decline of 24% from the current price.