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Large Bearish Play In Exxon Mobil Options

 January 31, 2013 02:09 PM

XOM - Exxon Mobil Corp. – Shares in Exxon Mobil are roughly flat on the session, trading 0.10% higher on the day $90.75 as of 10:55 a.m. ET ahead of the company's fourth-quarter earnings report tomorrow before the open. A large put spread initiated on XOM in the early going today indicates one big options market participant is positioning for the price of the underlying to potentially pullback sharply during the next six months. The trader appears to have purchased a 30,000-lot July $77.5/$87.5 put spread for a net premium of $1.89 apiece. The spread makes money if shares in XOM decline 5.7% from the current price of $90.75 to breach the effective breakeven point on the downside at $85.61. Maximum potential profits of $8.11 per contract are available on the spread should shares in Exxon plunge nearly 15% to $77.50 by July expiration. Interestingly, a similar protective play was established on ConocoPhillips yesterday prior to that company's earnings release after the close on Wednesday. Shares in Conoco are down roughly 5.0% today at $58.08 after the company's projection for total production in 2013 was lower than 2012 production. Wednesday's large COP trade, the purchase of a roughly 50,000-lot $57.5/$47.5 put spread at a net premium of $1.80 each, makes maximum profits of $8.20 per contract should shares in ConocoPhillips drop 18% from the current price of $58.08 to $47.50 by August expiration.

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CIEN - Ciena Corp. – Bullish options on Ciena Corp. are changing hands at a clip this morning, with shares in the communications equipment provider up 6.5% on the session to stand at $15.55 as of 11:15 a.m. ET in New York trading. Ciena's shares are rising in sympathy with JDS Uniphase Corp, after better-than-expected second-quarter earnings released from the company after the close on Wednesday sent its shares up more than 18% today. Ciena reports first-quarter earnings in March, and some traders appear to be establishing bullish bets on the stock to position for shares to extend gains. Upside call buyers looked to the Mar. $16 and $17 strikes calls, purchasing several hundred contracts at each striking price for average premiums of $0.81 and $0.49 apiece, respectively. Call volume is greatest out at the April $16 strike, where upwards of 10,500 lots changed hands against open interest of 2,961 contracts this morning. The bulk of $16 call options appear to have been purchased for an average premium of $1.12 apiece, thus positioning buyers to profit at expiration should shares in Ciena Corp. rally 10% over the current price of $15.55 to top the average breakeven point at $17.12.

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ZAGG - Zagg, Inc. – Put options on the maker of coverings and accessories for consumer electronics products are more active than usual this morning, with shares in Zagg, Inc. down 2.0% on the session at $6.91 as of 11:30 a.m. ET. The stock has declined roughly 10% since the start of 2013 and nearly 50% off a May 2012 52-week high of $13.29. Some options traders dabbling in March expiry puts on Zagg this morning appear to be positioning for shares in the name to extend declines in the near term. The company reports fourth-quarter earnings in the final week of February. Bearish trades are most active at the Mar. $6.0 strike, with more than 950 puts in play against open interest of 125 contracts. Time and sales data suggests most of the puts were purchased within seconds of the opening bell this morning for an average premium of $0.36 each. Put buyers stand ready to profit at March expiration should Zagg's shares slide 18% from the current price of $6.91 to trade below an average breakeven point and fresh 52-week low of $5.64.



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