Real-time equity news [E U] U.S. stock market report 1433 ET 27Feb2013 Groupon (NasdaqGS: GRPN - news) weekly call ratio spread targets big gains on earnings -------------------------------------------------------------------------------- Shares of Groupon Inc jumped 7.89 percent to $5.98 late on Wednesday ahead of the daily deal company's fiscal fourth-quarter earnings due after the market close.
Frederic Ruffy, WhatsTrading.com options strategist, said recent options trades in Groupon are interesting, as an investor apparently opened a Weekly $6.50-$7 1x2 call ratio spread expiring this Friday for 1 cent, which traded 9,300 times. It appears that they bought the $6.50 strike calls and sold twice as many of the further out-of-the-money $7 strike calls, possibly willing to put a relatively small debit at risk if shares remain below $6.50, for the potential of a big percentage gain if shares rally towards $7 after the results are announced, Ruffy said.
But he noted there's additional risk if the stock moves sharply higher, because not all of the $7 strike calls are covered by the $6.5s as an investor would be net short an upside call. Options volume on Groupon was 3.7 times the daily average with 80,000 calls and 14,000 puts traded so far late on Wednesday, according to Trade Alert.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1337 ET 27Feb2013 Traders eye Elan July $11 strike calls after bid --------------------------------------------------------------------------------
The $11 strike calls on Elan Corp (Other OTC: ELNCF - news) in multiple expirations have grabbed investors' interest following Royalty Pharma's plans to take its $6.6 billion offer for the Irish drugmaker to Elan investors.
Shares of Elan rose nine cents to $11.12 on the New York Stock Exchange and recent option trades include a 9,200-lot of July $11 strike calls for 80 cents per contract when the market was 70 to 85 cents, said WhatsTrading.com options strategist Frederic Ruffy. In all, 10,019 contracts traded in the strike price so far against 12,000 lots in open interest, according to Trade Alert.
Ruffy noted that the March and April $11 ELN strike calls are attracting some modest activity as well. Total (NYSE: TOT - news) option volume consisted of 12,000 calls and 451 puts traded so far on Elan, Trade Alert figures show. The brisk call activity was accompanied by a lift in 30-day at-the-money implied volatility which rose 11 percent to 23.5 percent.
"Interest in $11 calls today comes as investment firm Royalty Pharma takes an $11 per share buyout offer directly to investors after receiving no response from the company," Ruffy said. "The bid for Elan came on Feb. 18 and just a few days after Elan said it sold its 50 percent stake in multiple sclerosis drug Tysabri to partner Biogen." Royalty Pharma plans to spend the next few weeks calling Elan shareholders about its offer made on Feb. 18, according to a source familiar with the situation.
Reuters Messaging: doris.frankel.reuters.com@reuters.net 1226 ET 27Feb2013-Option traders shed March puts on Flowers Foods (NYSE: FLO - news) -------------------------------------------------------------------------------- Options traders on Flower Foods Inc are apparently shedding their near-term put positions to harvest premium. The turnover on Flowers was 12.4 times the daily average with 13,000 puts versus only 844 calls crossing the tape by midsession on Wednesday, data from Trade Alert show.
"Sellers are dumping March $25 puts on Flowers Foods this morning, collecting about 15 cents for nearly 11,000 contracts so far," said Trade Alert President Henry Schwartz. Looking at trade history, Trade Alert noticed record volume in Flowers on Feb. 15, when buyers paid up to 40 cents apiece for these options as shares traded near $27.60.
Put sellers risk being obligated to buy shares if they fall below the strike price before expiration, but if shares stay above the strike price, investors keep the premium collected. Shares of Flowers rose 4.62 percent to $28.99 during the first half of the trading session on Wednesday.
Meanwhile, Flowers Foods is set to buy Hostess bread brands including Wonder bread for $360 million after no other bidder stepped up to make a competing offer, a source familiar with the matter said on Wednesday. The bankrupt bakery company was set to run an auction on Thursday for the brands, which also include Butternut, Home Pride, Merita and Nature's Pride, but there will be no auction since there were no other bids, the source said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1114 ET 27Feb2013-Spike in fear gauge sets records for some volatility products --------------------------------------------------------------------------------
The sharp move in short-term volatility this week has had an impact on some exchange-traded volatility products. The CBOE Volatility Index or VIX rallied 34 percent to 18.99 on Monday alongside a sell-off in U.S. equities. It was the largest one day percentage increase since Aug. 18, 2011, when the VIX closed at 42.67. "The 34 percent spike in the VIX makes it the eleventh largest one-day spike in the 24 years of VIX historical data going back to 1990," said Bill Luby, publisher of the VIX and More blog in a recent report.
Stock volume on the iPath S&P 500 VIX Short-Term Futures exchange-traded note on Monday was the highest in its history, by almost a factor of 2, said Enis Taner, global macro editor at RiskReversal.com. The VXX volume almost reached 100 million shares on Monday and a good portion of that volume was short covering, "as traders panicked when VIX spot moved above front month VIX futures," Taner said in a report this week.
In addition, option volume tied to the VIX set an all-time high as nearly 1.4 million contracts traded on Tuesday, beating the previous record of 1.21 million contracts set on Sept. 11, 2012, CBOE said. The VIX gave back about 11.5 percent on Tuesday and some of the bigger volume trades involved investors who had previously positioned for a rally in the VIX coming back to close those positions, said derivative strategists at Susquehanna Financial Group. For example, closing investors sold 150,000 April 20-25 VIX call spreads at 55 cents with April VIX futures around 16.95. The position appears to have been initiated on Jan. 31 when the spreads were bought for 70 cents, SFG said. Later on Tuesday, an investor sold 45,000 March 15 VIX calls at $2.725 with March futures at 17.20, indicating they anticipate the VIX to head even lower, SFG said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
0913 ET 27Feb013-Total option open interest stands at 4.31 mln contracts --------------------------------------------------------------------------------
A total of 18.1 million contracts changed hands in the U.S.-listed options market on Tuesday, resulting in net open interest growth of 1.96 million calls and 2.35 million puts, according to Trade Alert.
Bank of America Corp, Apple Inc (NasdaqGS: AAPL - news) , First Solar Inc (Xetra: A0LEKM - news) and Citigroup Inc (NYSE: C - news) attracted the greatest growth in option open positions, data from Trade Alert showed.
The top five new positions opened include 25,000 American International (NYSE: AFF - news) Group Inc April $36 strike put; 22,000 Bank of America January 2014 $12 strike calls, 22,000 Intel Corp March $22 strike calls; 21,000 Bank of America January 2015 $10 strike puts; and 20,000 Dell Inc May $14 strike calls, Trade Alert said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
0714 ET 27Feb2013-Economic and earnings diary for Feb. 27 --------------------------------------------------------------------------------
Economic data expected on Wednesday includes January durable goods orders and pending home sales for January. Also, Federal Reserve Chairman Ben Bernanke delivers semi-annual testimony on the economy and monetary policy before the House Financial Services Committee.
S&P 500 companies still expected to post earnings on Wednesday include Centerpoint Energy (NYSE: CNP - news) , Dollar Tree Inc (NasdaqGS: DLTR - news) , J C Penney Co Inc, Limited Brands (NYSE: LTD - news) , Monster Beverage, Mylan Inc (NasdaqGS: MYL - news) , Pall Corp , Target Corp (NYSE: TGT - news) and TJX Cos.
Reuters Messaging: Charles.mikolajczak.thomsonreuters.com@reuters.net
