CBOE Volatility Index (VIX) –
A massive bearish put position initiated on the VIX today is a bullish
sign for the S&P 500 index. The VIX fell more than 6% during the
current session to stand at 21.21 as the past two day's uptick in
equities serve to dissipate some of the fear and uncertainty felt by
investors during the prior trading week. One investor anticipating
further downside movement for the VIX picked up roughly 103,000 puts at
the March 20 strike for an average premium of $0.70 per contract. The
put options position the investor to accrue profits beneath a VIX
reading of 19.30 through expiration. It appears the investor expects
the so-called fear-gauge to head in the direction of the index's
52-week low of approximately 17.49 attained on January 19, 2010. But,
the VIX must fall another 9% from the current reading in order for the
investor to breakeven by expiration. Furthermore, today's reading is
still 21.25% greater than the 52-week low described previously.
Morgan Stanley(MS) –
Global financial services firm, Morgan Stanley, attracted the attention
of bullish options investors in afternoon trading. Shares are currently
trading 1.00% higher at $27.83 with roughly one hour remaining in the
trading day. A bull call spread stuck out like a sore thumb in the
scantily populated March contract on the stock today. One investor
purchased 5,000 calls at the March $28 strike for a premium of $1.35
each, and sold the same number of calls at the higher March $31 strike
for an average premium of $0.34 apiece. The trader paid a net premium
of $1.01 per contract for the spread, but stands to accrue maximum
potential profits of $1.99 per contract should Morgan Stanley's shares
rally up to $31.00 ahead of expiration day. The call-spreader breaks
even on the transaction as long as MS's shares rise 4.25% from the
current price to $29.01 before the options expire.
Bank of America Corp. (BAC) –
Optimistic sentiment on Bank of America appeared in the August contract
today amidst a 0.65% improvement in shares of the underlying stock to
$15.52. One bullish trader initiated a call spread to position for
upward movement in BAC's shares by expiration. The investor purchased
4,000 calls at the August $16 strike for an average premium of $1.52
apiece, spread against the sale of 4,000 calls at the higher August $20
strike for $0.37 each. The net cost of the bull call spread amounts to
$1.15 per contract. Maximum potential profits of $2.85 per contract
accumulate for the trader if the financial firm's shares rally 29% from
the current price to $20.00 ahead of August expiration.
United States Natural Gas ETF (UNG) –
A bullish risk reversal enacted on the US natural gas exchange-traded
fund suggests one investor anticipates continued upward movement in the
price of the underlying shares by expiration in March. Shares of the
UNG are up 1% on the day to stand at $9.90. The reversal player sold
10,500 in-the-money puts at the March $10 strike for a premium of $0.64
apiece in order to buy 10,500 calls at the same strike for $0.63 each.
The trader pockets a net credit of 1 penny per contract on the
transaction, and keeps that amount if shares trade at $10.00 or above
by expiration. Additional profits accumulate if shares of the
underlying rally over and above $10.00.
Suncor Energy, Inc.
