Today’s tickers: SPLS, AAPL, RACK, VMED, CTCM, SLB, VLO, XLF, VIX
SPLS – An announcement from Dell that it has entered a pact with office retailer Staples to market computers and other products in 1,400 stores nationwide sent shares in Staples 3.4% higher to $22.28. Trading in Staples options, meanwhile, surged to nearly 12 times the daily average, with more than 5 puts trading for every call. Of interest was volume in the December puts, with positions at the 20 and 25 strikes trading to the middle of the market against existing open interest. We venture to suppose that this volume involved traders closing out positions opened late in the spring. The in-the-money December puts which traded to the middle of the market commanded prices of $2.80 to $2.85 – last time volume on this contract was so high was late May, when the fetching price was a dollar less.
Apple’s (AAPL) much anticipated after-the-bell report has market players keen for a gander at the first full quarter of iPhone sales, and greater disclosure surrounding Apple’s commission structure with iPhone servicer AT&T. While the market is generally positioned for price appreciation in the wake of its earnings report, the fact that shares have gained 25% over the past quarter suggests that valuation may be sitting a bit heavy on some traders. With shares 2.6% higher at $174.88, bullish near-term expectations found expression earlier today through heavy buying in November calls at the 170, 175 and 180 strikes. The outlook into January showed more abbreviated upside expectations, with call spread activity occurring between strikes 180 and 200. A look at the delta on these calls indicates that while the odds are 50/50 of Apple shares trading above $180 in the first month of 2008, there’s less than a one-in-three chance that Apple will see the ball drop on $200 by that time.
RACK – Rackable Systems Inc. saw relatively heavy options volume to accompany a 3% share price rally in Monday trading. Shares rallied to $13.24 while November call options at the 15 strike were most actively traded. The calls costing around 0.45 today are 29% higher than at Friday’s close. The company’s share price has ranged between $11.25 and $15.00 over the last six months. Open interest at the 15 strike of 4,816 contracts already exists, but we can’t see why today’s increase in premium would be rationale for closing positions. Hence, coupled with today’s price rise in the underlying, we’d say this looks like fresh speculative call buying activity. Volume of nearly 10,000 options represents around 15% of current open interest.
