NTAP – NetApp, Inc. – Medium-term bullish trading in NetApp call options appears to be the work of an optimistic investor expecting the price of the underlying shares to rally sharply, perhaps even to new all-time highs, by the end of 2010. Shares of the provider of enterprise storage and data management software and hardware products and services increased as much as 3.15% at the start of the session to secure an intraday- and new 52-week high of $47.89. It looks like the options trader originally took a bullish stance on NTAP back on August 27, 2010, by purchasing approximately 4,000 calls at the December $45 strike for an average premium of $2.34 each. Shares of the underlying stock have rallied more than 15.5% since August 27 when shares closed at $41.45. The surge in NTAP shares boosted premium on the investor’s call options, and today it appears he sold the 4,000 contracts for a substantially richer premium of $5.14 a-pop. Average net profits enjoyed on the closing sale amount to $2.80 per contract. Next, it seems the same bullish player purchased a debit call spread in the December contract to prepare for NTAP shares to extend gains. The trader picked up approximately 4,000 calls at the December $50 strike for an average premium of $2.91 each, and sold roughly the same number of calls at the December $60 strike at an average premium of $0.67 apiece. Net premium paid to establish the spread amounts to $2.24 per contract. Profits start to accumulate for the investor if NetApp’s shares surge 9.1% over today’s high of $47.89 to surpass the average breakeven price of $52.24 by December expiration. Maximum potential profits of $7.76 per contract pad the bullish player’s wallet if shares jump 25.3% in the next several months to trade above $60.00 by expiration day.
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