HUN – Huntsman Corp. – The manufacturer of chemical products popped up on our ‘hot by options volume’ market scanner in the first half of the trading session after one investor rolled a large long call position forward to a more bullish strike in the October contract. Huntsman’s shares rallied as much as 1.05% at the open to touch an intraday high of $10.72 before sliding down to a low of $10.48. Shares recovered somewhat by 11:50 am ET to stand 0.40% higher on the day at $10.65. It looks like the HUN-bull originally accumulated approximately 12,800 calls at the September $9.0 strike for an average premium of $0.79 apiece starting on August 17, 2010, when shares were trading around $9.55 each. The subsequent rally in the price of the underlying stock lifted premium on the September $9.0 strike calls, allowing the investor to sell 12,832 contracts today at a premium of $1.65 apiece. Average net profits on this leg of the transaction amount to $0.86 per contract. Next, the investor extended optimism on the chemical company by purchasing 12,832 calls at the higher October $10 strike for an average premium of $0.90 each. Profits on the new position start to accrue if Huntsman’s shares rally 2.35% to surpass the breakeven point of $10.90 by October expiration. Other signs of bullish sentiment also took place at the October $10 strike where investors sold 1,100 puts to pocket premium of $0.25 apiece. Put sellers keep the full premium received as long as shares exceed $10.00 through expiration next month. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $9.75 should the puts land in-the-money at expiration.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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