ACE call options in demand - option implied volatility explodes
Today's tickers: ACE, EFA, HAL, AMAT, WHR, DE, JTX & WCG
" title="ACE : Stock Quote, News and Research" class="showrtquote">ACE - ACE Limited
– The surge in demand for call options on the insurance company today
drove option implied volatility up 19.75% to 28.67%, while shares
gained more than 2% to $49.78 during the trading day. Investors
populating the December contract exhibited bullish sentiment on ACE by
selling puts and buying calls. Approximately 3,000 puts were shed at
the December 50 strike for an average premium of 1.51 apiece, while
some 2,100 calls were purchased at the same strike for roughly 89 cents
each. Call volume at the January 50 strike sky-rocketed to 21,666
contracts – on previous existing open interest of just 1,402 calls – as
traders scooped up about 20,000 lots for a premium of 1.42 per
contract. Investors long the January contract call options are
positioned to accrue profits if ACE's shares trade above the breakeven
price of $51.42 by expiration.
EFA - iShares MSCI EAFE Index ETF
– The exchange-traded fund, which includes stocks from Europe,
Australasia and the Far East, attracted bearish option players despite
the 2.5% rise in shares today to $56.88. One investor, who may hold a
long position in the underlying stock, unfurled a ratio put spread in
the January 2010 contract. The trader purchased 10,000 puts at the
January 55 strike for an average premium of 1.39 each, and sold 20,000
puts at the lower January 52 strike for about 70 cents apiece. The
investor pockets a net credit of 1 penny per contract on the trade and
establishes downside protection in case shares of the EFA decline ahead
of expiration. The 1 cent credit is ‘free money' for the trader as long
as the shares remain above $55.00 through expiration in January.
HAL - Halliburton Co.
– Options activity on the oil and gas company today suggests at least
one investor is bracing for potential share price erosion through
expiration in January. Halliburton's shares rose 1% during the session
to $29.57. The trader responsible for the bearish ratio put spread is
likely holding a long position in the underlying stock. If this is the
case, today's transaction provides downside protection for the
investor. It appears 5,000 puts were purchased at the January 29 strike
for an average premium of 1.24 apiece, spread against the sale of
10,000 puts at the lower January 24 strike for 18 pennies each. The net
cost of the ratio spread amounts to 88 cents per contract.
