Stock Options Watch: ORCL, MRK, WCG

ORCL – Oracle Corp. – Shares in software company, Oracle Corp., are getting crushed today, down as much as 9.5% to a seven-month low of $30.06, after the company reported fourth-quarter sales that missed estimates for a second consecutive quarter. The sharp move in the price of the underlying on this options expiration Friday sparked heavy trading traffic in ORCL calls and puts today, with volume rising above 108,500 contracts by 11:25 a.m. ET versus the stock’s average daily volume of around 43,000 contracts. Activity in the January 2014 expiry options during the first 20 minutes of the session suggests one strategist is positioning for shares in the largest maker of database software to rebound during the second half of the year. It looks like the trader picked up roughly 5,000 calls at the Jan ‘14 $31 strike for an average premium of $2.13 per contract. The upside calls make money at expiration next year as long as shares in Oracle Corp. rally more than 10% over today’s low of $30.06 to top the average breakeven point at $33.13.

MRK – Merck & Co., Inc. – Shares in drug maker, Merck, are bucking the trend today, up as much as 2.8% in the early going to $47.60 amid a second consecutive session of selling across U.S. equities. Merck’s shares are currently off their highest level of the session to stand higher by 1.0% on the day at $46.77 just before midday in New York. Options traders anticipating continued gains in Merck’s shares in the near term appear to be buying the Jun 28 ’13 expiry weekly calls on the stock today. A burst of activity in the Jun 28 ’13 $48 and $48.5 strike calls just after 9:37 a.m. ET this morning appears to be the work of one trader snapping up more than 500 contracts at each strike at average premiums of $0.32 and $0.19 apiece, respectively. The bullish stance on MRK may pay off should shares in the name rally another 3.3% and 4.1% over the current price of $46.77 to settle above breakeven points at $48.32 and $48.69 by expiration next week.

WCG – WellCare Health Plans, Inc. – The provider of managed care services to government-sponsored healthcare programs popped up on our ‘hot by options volume’ market scanner due to a sizable print in the September expiry puts on the stock. Shares in WellCare are in positive territory amid a down day for U.S. stocks, up 0.30% on the session at $52.76 as of midday in New York. The largest trade in WellCare options today suggests one trader expects the stock to at least trade above its 52-week low of $44.80 through September expiration. The stock has been on the decline in recent months, down 18% off a six-month high of $64.29 reached back on April 2nd. One strategist appears to have sold 2,500 puts at the Sep $45 strike for a premium of $1.15 per contract. The put seller walks away with the full amount of premium as long as shares in WCG exceed the striking price at September expiration.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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