Option Activity Alert: OIH, AFFY

OIH – Oil Services HOLDRS Trust – Shares in the Oil Services HOLDRS Trust are up 0.50% in the final hour of trading to secure an intraday- and new 52-week high of $147.34. One options player expecting shares to continue to hit new highs through February expiration initiated a debit call spread. Shares in the OIH, an issuer of depository receipts known as Oil Service HOLDRS that represent ownership in the common stock of companies engaged in drilling, well-site management and other services for the oil service industry, are up 5.25% year-to-date, and have surged 57.75% since touching down at a six-month low of $93.36 on July 1, 2010. The optimistic options trader looked to out-of-the-money calls expiring next month, buying 3,600 calls at the February $155 strike for a premium of $1.48 each, and selling the same number of calls up at the February $160 strike at a premium of $0.58 apiece. Net premium paid to initiate the spread amounts to $0.90 per contract. Thus, the investor is prepared to make money should the price of the underlying shares rally another 5.8% over today’s high of $147.34 to surpass the effective breakeven price of $155.90 by expiration day in February. Maximum potential profits of $4.10 per contract are available to the call-spreader should shares in the OIH jump 8.6% to trade above $160.00 before the contracts expire. Options implied volatility inched up 3.2% to 26.42% by 3:55pm in New York.

AFFY – Affymetrix, Inc. – Investors are buying call options on the biotechnology company today with shares in the Santa Clara, CA-based firm rising as much as 7.6% during the session to an intraday- and 6-month high of $5.67. Bullish players expecting shares in Affymetrix to continue to rally picked up large numbers of in-the-money call options in the May and August contracts. The maker of products used in genetic analysis reports fourth-quarter earnings after the closing bell on February 3, 2011. Options traders purchased more than 1,700 in-the-money calls at the May $5.0 strike for an average premium of $0.90 per contract. Call buyers at this strike make money if shares in AFFX increase another 4.05% to exceed the average breakeven price of $5.90 ahead of May expiration day. Bullish sentiment spread to the August $5.0 strike where another 1,760 call options were purchased for an average premium of $1.10 each. Investors holding these contracts are poised to profit should the price of the underlying stock surge 7.6% over today’s high of $5.67 to surpass the average breakeven price of $6.10 before the calls expire in August. More than 4,730 options have changed hands on Affymetrix thus far in the session on total previously existing open interest of 10,072 contracts on the stock. Options implied volatility on the biotech company is down 7.7% at 52.06% in the final 30 minutes of the trading day.

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.

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