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-$0.34 (-2.35%)
10:00PM (15 mins delay)
Oct 28, 2009 - 12:37 PM EDT
The Goodyear Tire & Rubber Co. (GT) – Shares of the largest tire producer in the U.S. plummeted 24.5% to $12.74 after the firm forecast an operating loss in North America this quarter. The dismal forecast overshadowed bullish third-quarter results wherein profits more than doubled to 30 cents per share on cost-cutting efforts. Option trading on the stock today reflects the mix of positive and negative news on the company. Some investors purchased calls at the November 15 strike 2,700 times for an average premium of 80 cents apiece, while others sold 2,500 calls at the same strike for 35 cents each. Call-buyers are perhaps expecting shares to rebound ahead of expiration. Profits will accrue for these rubber-optimists if shares rally 24% to $15.80 by expiration. Conversely, call-sellers hope to retain the 35 cent premium received on the sale in the event that shares remain south of the $15.00-level. One other bullish sign for the tire company was the sale of 1,500 puts at the November 12.5 strike for 46 cents apiece. Put-sellers at this strike will retain the full premium received as long as shares trade above $12.50 through expiration day. Option implied volatility has surged 31% during the past week to reach 63% today.
Regions Financial Corp. (RF) – Large-volume bearish put plays in the November contract launched the financial services firm onto our ‘most active by options volume’ market scanner. Shares are currently lower by 2% to $4.97. One investor banked gains on a previously established bearish position and subsequently rolled the position to a lower strike price. It appears the trader originally purchased 20,000 puts at the November 6.0 strike for approximately 60 cents per contract on September 16, 2009, when shares were trading at $6.39. The put options have since landed in-the-money, allowing the trader to sell the contracts today at an average premium of 1.04 each. Net profits on the sale amount to approximately 44 cents per contract for a total of $880,000. Next, the investor established a new bearish position by purchasing 20,000 puts at the in-the-money November 5.0 strike for 34 cents a-pop. Profits will begin to accumulate if Region’s shares slip beneath the breakeven price of $4.66 by expiration. Option implied volatility on the stock steadily increased throughout the trading week, rising 29% since Monday’s opening value of 52%, to the current high of 67%.
Source: Seeking Alpha (Oct 28, 2009 - 12:37 PM EDT)
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