Option Activity Alert: Agrium, Geron, iShares MSCI Emerging Markets Index

AGU – Agrium, Inc. – Shares of Canada’s second-largest fertilizer producer rallied as much as 3.2% today to reign in an intraday high of $85.66 after corn futures jumped to a near two-year high. Agrium was upgraded to ‘sector outperformer’ from ‘sector performer’ at CIBC World Markets where analysts upped their target share price on the company to $100.00 from $70.00. One options trader was prepared for the bullish move in the Agrium’s shares and opted to book profits, as well as extend optimism on the stock in the November contract. It looks like the investor purchased 10,000 calls at the November $85 strike for an average premium of $2.75 apiece back on October 8, 2010, when shares were trading around $80.36. Today the trader sold the calls for a premium of $4.10 apiece to pocket net profits of $1.35 per contract. Next, the investor extended bullish sentiment on the stock by picking up a fresh batch of 10,000 calls at the higher November $90 strike for an average premium of $2.375 each. The new long call position is profitable for the investor if Agrium’s shares surge 7.85% over today’s high of $85.66 to surpass the average breakeven point at $92.375 by November expiration.

EEM – iShares MSCI Emerging Markets Index ETF – A sizable put spread on the EEM, an exchange-traded fund created to provide investment results that correspond to the price and yield performance of the MSCI Emerging Markets Index – an Index designed to measure equity market performance in the global emerging markets, indicates one strategist is protected in case shares of the underlying fund fall ahead of January 2011 expiration. Shares of the ETF edged 0.60% lower in late-afternoon trading to arrive at $45.93 by 3:10 p.m. The put player appears to have purchased 25,000 puts at the January 2011 $42 strike for a premium of $1.45 each, and sold the same number of puts at the January 2011 $36 strike at a premium of $0.45 apiece. Net premium paid for the transaction amounts to $1.00 per contract. The investor makes money, or realizes downside protection, if shares of the fund plunge 10.7% lower to breach the effective breakeven point at $41.00 by expiration day next year. Maximum potential profits of $5.00 per contract are available to the trader should shares tumble 21.6% to trade below $36.00 ahead of January expiration.

GERN – Geron Corp. – Shares of the biotechnology company are up 10.05% at $6.24 as of 1:25 p.m. in New York trading on news the company started a Phase 1 clinical trial to test the safety and tolerability of its embryonic stem cell therapy aimed at spinal cord injuries. An analyst at Rodman & Renshaw reaffirmed his ‘market outperform’ rating on the stock with a target share price of $9.00 today. Earlier in the trading session Geron’s shares increased as much as 11.46% to touch an intraday high of $6.32, the highest recorded price since August 2, 2010. Geron Corp.’s embryonic stem cell therapy clinical trial is the first of its kind approved by the FDA. Bullish traders hoping to see the biotechnology firm extend gains picked up in- and out-of-the-money call options in the October and November expiries. Investors purchased approximately 1,000 in-the-money calls at the October $6.0 strike for a premium of $0.25 each. In-the-money call buyers make money if the price of the underlying stock exceeds the average breakeven price of $6.25 through expiration on Friday. Bullish sentiment spread to the higher November $7.0 strike where nearly 1,000 calls were purchased for an average premium of $0.355 a-pop. Traders holding these contracts stand ready to amass profits should shares surge 16.4% over today’s high of $6.32 to trade above the average breakeven price of $7.355 by November expiration. The overall reading of options implied volatility on the biotechnology company is up 26.1% to stand at 73.79% this afternoon.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

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.

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.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.