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Bullish Positions Take Shape Ahead Of Walgreen Co. Earnings

 December 07, 2011 01:49 PM

Walgreen Co. (WAG) – Shares in the largest U.S. drugstore chain may rally sharply heading into the New Year, according to one options player dabbling in Jan. 2012 contract call options this morning. The buyer of a sizable bull call spread may be using the position to prepare for Walgreen's shares to pop after the company reports first-quarter earnings ahead of the opening bell on December 21. The stock currently trades flat on the session at $34.01 as of 11:45 AM in New York. It looks like the trader purchased a roughly-3,000 lot Jan. 2012 $35/$39 call spread for an average net premium of $1.06 per contract. The investor stands ready to profit at expiration next year as long as shares in Walgreen Co. increase 6.0% to exceed the average breakeven price of $36.06. Maximum potential profits of $ are available to the call-spreader if the drug retailer's shares soar 14.7% to trade above $39.00 at expiration in January. Walgreen's shares last traded above $39.00 at the beginning of August.

[Related -Walgreen Company (NYSE:WAG) Q1 Earnings Preview: What To Watch?]

ION Geophysical Corp. (IO) – The provider of seismic solutions and equipment to the global energy industry rallied in sympathy with shares in Mitcham Industries (MIND), which jumped to a new 52-week high today after reporting better-than-expected third-quarter earnings after the close on Tuesday. ION's shares are up 1.8% to stand at $6.82 as of 12:20 PM in New York. At least one options trader is taking advantage of the positive day for ION's shares by picking up bearish put options on the cheap. It looks like the investor purchased more than 3,000 puts at the Dec. $6.0 strike for a premium of $0.10 each. These same options would have cost the trader $0.50 each less than one week ago. The bearish position may yield profits to the investor in the event that ION's shares drop 13.5% to breach the effective breakeven price of $5.90 at expiration next week. The price of the underlying traded as low as $5.30 as recently as November 23. The company announced on Monday it will hold a conference call to discuss its three to five year market and business outlook the morning of Friday, December 9.

[Related -Walgreen Co. (WAG) Dividend Stock Analysis]

Hertz Global Holdings, Inc. (HTZ) – A sizable ratio call spread on the car and truck rental company indicates one strategist is positioning for shares in Hertz Global Holdings to potentially post double-digit gains during the next six weeks. Shares in the Park Ridge, New Jersey-based company slipped 0.35% to $11.93 in the first half of the session. The bullish player appears to have parked the ratio spread in the Jan. 2012 contract, buying 3,150 calls at the $12.5 strike for a premium of $0.70 each, and selling 6,300 calls up at the $17.5 strike at a premium of $0.01 apiece. Net premium paid to initiate the spread amounts to $0.68 per contract, thus positioning the trader to profit should shares in HTZ rally 10.5% to surpass the effective breakeven point at $13.18. The investor may enjoy maximum potential profits of $ in the event that the car rental company's shares surge 46.7% to settle at $17.50 at expiration day next year.

Nabors Industries, Ltd. (NBR) – Shares in Nabors Industries, which, as of Tuesday's close, had increased roughly 9.0% since the end of last week, slipped into the red on Wednesday. The stock fell 2.0% to $18.31 by 12:35 PM ET; however, call activity on the oil equipment and services provider this morning suggests one trader expects shares to get back on the rally-track. The investor appears to have purchased more than 1,700 calls at the Mar. 2012 $22 strike for an average premium of $0.99 a-pop. Profits may accumulate on the position if shares in Nabors jump 25.5% to exceed the average breakeven price of $22.99 at expiration day next year. NBR's shares last traded above $22.99 back on August 4.



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