MED – Medifast, Inc. – Contrarian players initiated bull call spreads on the maker of weight management products this morning despite the 2.10% decline in the price of the underlying shares to $26.29. It looks like investors purchased 2,000 calls at the January 2011 $29 strike for an average premium of $2.38 each, and sold the same number of calls at the higher January 2011 $33 strike at an average premium of $1.15 apiece. The net cost of buying the spread amounts to $1.23 per contract. Profits start to accumulate for call-spreaders should Medifast’s shares surge 15.00% over the current price of $26.29 to surpass the effective breakeven price of $30.23 by January expiration. Maximum potential profits of $2.77 per contract are available to the investor if MED’s shares jump 25.5% and trade above $33.00 by expiration day next year. Medifast is scheduled to report third-quarter earnings ahead of the opening bell of November 4, 2010. Demand for calls on the stock helped lift the overall reading of options implied volatility 5.00% to 54.30% by 11:45 am ET.
SLE – Sara Lee Corp. – Shares of the manufacturer of branded consumer goods such as meats, baked goods, beverages and household products jumped as much as 12.80% at the start of the trading session to an intraday high of $15.15 – the biggest gain in nearly two years – after the New York Post reported Sara Lee Corp. rejected a $12 billion unsolicited leveraged buyout offer by KKR & Co. SLE’s shares cooled somewhat by 11:55 am ET to stand 8.40% higher on the day at $14.56. Takeover speculation and rising demand for options on the stock lifted Sara Lee’s overall reading of options implied volatility 33.2% to 30.40% in the first half of the trading session. Investors hoping to see the price of the underlying stock continue higher purchased some 3,800 calls at the November $15 strike for an average premium of $0.57 per contract. Call buyers are prepared to profit should Sara’s shares surge 6.95% over the current price of $14.56 to exceed the average breakeven point to the upside at $15.57 by November expiration day. Approximately 5,430 calls changed hands at the November $15 strike versus paltry existing open interest of just 40 contracts at that strike.
WYNN – Wynn Resorts, Ltd. – Casino companies rallied today after Macau, the world’s largest gambling arena, reported that revenue jumped 40% in the month of September. Shares in Las Vegas, NV-based Wynn Resorts increased as much as 5.82% in morning trading to secure an intraday high of $92.16. The stock is currently up 3.60% at $90.25 as of 12:10 pm ET. Bullish players betting WYNN’s shares could extend gains through October expiration scooped up in- and out-of-the-money call options. Traders picked up roughly 1,500 in-the-money calls at the October $90 strike for an average premium of $3.02 each. In-the-money call buyers make money if the casino operator’s shares rally 3.1% over the current price of $90.25 to surpass the average breakeven point at $93.02 by expiration day. Bullish sentiment spread to the higher October $95 strike where approximately 2,600 calls were purchased for an average premium of $1.11 apiece. Investors long the contracts make money if Wynn Resorts’ shares rise 6.50% to trade above $96.11 by October expiration. Finally, options traders coveted 1,000 calls at the October $100 strike by shelling out an average premium of $0.35 per contract. Options implied volatility on the stock is up 4.9% at 45.34% as of 12:15 pm ET.