IPG – Interpublic Group of Companies, Inc. – A long straddle strategy initiated on the advertising and marketing company implies one investor expects greater volatility in the price of the underlying through expiration in February. The inherent nature of the long straddle suggests shares of IPG may swing dramatically in the next few weeks. Interpublic's shares are currently off 2.5% to stand at $7.27 in afternoon trading. The straddle-player purchased about 2,000 puts at the February $7.50 strike for an average premium of $0.55 apiece and bought the 2,000 calls at the same strike for $0.45 each. The net cost of the transaction amounts to one dollar per contract. The investor responsible for the straddle likely expects to garner profits given either a 17% rally to the upside above the breakeven price of $8.50, or a 10.5% decline in shares beneath the lower breakeven point at $6.50, by expiration next month. Higher option implied volatility within the time period specified above is advantageous to the investor because higher option premiums may allow him to sell-to-close the straddle at a profit. Volatility on the stock increased 15.53% during the session from an intraday low of 44.02% up to a high of 50.86%.
MBI – MBIA Inc. – Shares of the insurance company surged more than 16.5% today to a high of $5.26 prompting some investors to increase bullish bets on the firm. Traders exchanged more than 59,600 contracts on MBI by 2:30 pm (EDT), which represents about 21% of the total open interest on the stock of 280,252 contracts. Call options traded more than 4.5 times to every put option exchanged during the session. It appears investors banked gains by selling more than 15,000 calls at the now in-the-money January $5 strike for $0.25 apiece and purchased about the same number of calls at the higher January $6 strike for one nickel per contract. With a breakeven point of $6.05 on the new calls, MBI's shares must jump another 15% from the intraday high before investors can accrue profits.
DAL – Delta Air Lines, Inc. – Bearish option traders bombarded Delta with pessimistic strategies today after the firm stated total December traffic declines 7.5% versus the same time in the previous year. Despite the decline in traffic, shares of the U.S. carrier are up nearly 6% to $12.82, perhaps because ‘load factor' – or the percentage of available seats filled with passengers – increased 0.4% last month to 81.2%. Option traders populating the March contract on the stock are wary of a pull-back in shares in the next several months. One investor established a large-volume put spread by purchasing 25,000 puts at the March $11 strike for $0.70 each, spread against the sale of 25,000 puts at the lower March $9 strike for $0.20 apiece. The net cost of the bearish play amounts to $0.50 per contract and establishes downside protection for the trader should shares slip beneath the breakeven price of $10.50 by expiration. Call-selling by other investors suggests the current state of shares is as good as it's going to get.