Gilead Sciences, Inc. (GILD) – Bullish
activity in the biotechnology company's options jumped and shares in
Gilead Sciences moved up more than 2.0% to $46.18 the same day the drug
maker presented at the 2012 RBC Capital Markets' Healthcare Conference
in New York. Positive comments from management along with the impending
April 19th first-quarter earnings report from the Company could be
catalysts for the sizable bull call spreads accumulating in the April
expiry. It looks like one investor purchased a roughly 15,000-lot April
$47/$50 call spread for a net premium of $1.13 per contract to position
for shares to extend gains during the next couple of months. Profits may
be available on the spread in the event that Gilead's shares rally
another 4.2% to surpass the average breakeven price of $48.13, while
maximum possible profits of $1.87 per contract pad the investor's wallet
should the stock surge 8.3% to top $50.00 at expiration. Gilead's
shares had realized year-to-date gains of 35.0% earlier this month after
the Company's better-than-expected fourth-quarter earnings report sent
the stock up as high as $56.50 on the 6th of February. The stock
subsequently came back down with a thud shortly after reaching its
highest level since 2008, but the options trader responsible for the
call activity this morning is poised to benefit should the stock regain
its footing in the near term.
Staples, Inc. (SPLS)– Shares
in the office supplies retailer rallied 4.7% to $15.95 in sympathy with
competitor, Office Depot, Inc., which opened sharply higher on
better-than-expected fourth-quarter earnings released ahead of the
opening bell this morning. Staples is scheduled to reveal its
fourth-quarter performance before U.S. markets open on Wednesday, and it
looks like options traders are positioning for the upward move in the
shares to continue. Front month calls are most active at the Mar. $16
strike, where it appears 2,400 contracts were purchased for an average
premium of $0.44 each. Fresh interest in the April $17 strike calls was
largely generated by buyers snapping up some 920 contracts at a premium
of $0.25 apiece. Investors long the $17 strike calls profit at
expiration if shares in Staples surge 8.2% to settle above the effective
breakeven price of $17.25. Longer-dated positioning also appears to be
the work of traders eyeing upside potential in the retail chain. June
$17 and $18 strike calls were purchased around 2,100 and 1,200 times for
average premiums of $0.51 and $0.25 per contract, respectively, within
minutes of the opening bell today. More than 16,000 contracts have
changed hands on Staples this morning, with roughly three calls in play
on the stock to each single put option.
Office Depot, Inc. (ODP) – The
Boca Raton, Florida-based office supplies retailer's fourth-quarter
earnings report topped analyst estimates and sent shares in ODP flying
to the upside. Shares are now at a six-month high, and the largest trade
in ODP options this morning suggests the stock has made its move for
now, and will likely remain range-bound over the next couple of months.
Office Depot's shares are currently up 15.9% at $3.50 as of 11:35 a.m.
in New York. It looks like the options player sold a 2,500-lot straddle
at the April $3.5 strike to pocket total premium of $0.60 per contract.
The trader walks away with the full amount of premium at expiration as
long as shares in Office Depot settle at $3.50. Premium received on the
straddle acts as a buffer against potential losses on the position given
limited fluctuations in the price of the underlying away from the $3.50
level. However, the trader could realize losses in the event that
Office Depot's shares rally above the upper breakeven price at $4.10 or
slip beneath the lower breakeven point of $2.90, at April expiration.
Shares in ODP have enjoyed a monster rally in 2012, up better than 60.0%
year-to-date. The straddle-strategist may keep some if not all of the
premium enjoyed on the transaction as long as the stock can hang onto
the 2012 gains.