Your intraday update on options trading.
Goldcorp Inc. (NYSE: GG) — Shares of the gold mining company are trading up at their highest in more than two years, and a number of options traders are betting Goldcorp’s shares have more room to run in the near term. Call options on GG are in high demand, with more than 3.1 calls changing hands on the stock for each single put option today. Shares in GG are currently up 3.5% at an intraday and new two-year high of $49.50. Investors expecting the price of the underlying to continue to move higher picked up more than 1,750 of the GG March 50 Calls for an average premium of 84 cents. Traders exchanged more than 6,600 calls up to the March $52.5 versus previously existing open interest of just 537 contracts. The majority of the calls, or roughly 4,500 contracts, were purchased at the GG March 52.5 Call strike for an average premium of 29 cents a-pop. Call buyers at this strike start making money if shares in Goldcorp rally another 6.6% over today’s high of $49.50 to surpass the average breakeven point at $52.79 by March expiration. Options implied volatility on the gold mining company increased 8% to 30.88 by 12:45pm.
Linn Energy (NASDAQ: LINE) — The oil and natural gas company popped up on our scanners this morning due to options activity in the July contract. The spread appears to be the work of an investor positioning for shares to hit a new 52-week high ahead of expiration. Shares in LINE are down slightly to stand at $38.70 in early afternoon trade. It looks like the strategist responsible for the transaction sold 2,000 of the LINE July 36 Puts for a premium of $1.15 per contract in order to buy the same number of LINE July 40 Calls at a premium of $1.35 apiece. The net cost of taking the bullish stance on LINE amounts to $0.20 per contract, thus positioning the trader to profit should shares in Linn Energy increase 3.9% over the current price of $38.70 to exceed the effective breakeven price of $40.20 by July expiration. Linn Energy’s shares last traded above $40.00 in May 2007.
IShares Dow Jones US Real Estate Index Fund (NYSE: IYR) — Shares in the IYR are down 1.05% to stand at $59.94 perhaps on comments from U.S. Treasury Secretary Timothy Geithner in testimony before the House Financial Services Committee regarding continued weakness in the sector. A number of bearish plays were initiated in IYR options this morning, including a sizable put spread in the September contract. It looks like one strategist positioned for shares in the ETF to continue to decline by purchasing 5,000 of the IYR September 60 Puts for $4.15 each, and selling the same number of puts of the IYR September 54 Puts at $1.95 apiece. The net cost of buying the spread amounts to $2.20 per contract, and prepares the put player to profit should shares in the fund fall another 3.6% to breach the effective breakeven price of $57.80 by September expiration. Maximum potential profits of $3.80 per contract are available to the investor if shares in IYR drop 9.9% to trade below $54.00 at expiration in seven months. The overall reading of options implied volatility on the ETF shot up 11.0% to 20.06 by 11:45 am in New York.
Yahoo Inc. (NASDAQ: YHOO) — A sizable stock and options combination play on Yahoo caught our eye this morning. It looks like the investor initiated a delta neutral position to benefit from bullish movement in the price of the underlying through October expiration. Shares in the online media company are currently down 1.00% to arrive at $16.24 as of 1:05 pm. The trader appears to have sold 310,500 shares of YHOO at $16.26 each, and purchased 11,500 calls up at the October $20 strike for a premium of $0.66 apiece, on a 0.27 delta. The trade positions the investor to profit should shares in YHOO spike higher ahead of expiration day in October. The options trader could profit from the short stock leg of the transaction if shares continue their downward trajectory, but more substantial gains are available to the upside if the price of the underlying rises sufficiently before October expiration.
Andrew Wilkinson is senior market analyst with Interactive Brokers, the professional’s gateway to the world’s markets.
