F – Ford Motor Co. – The automaker’s shares jumped 6.80% during the session to an intraday high of $17.41, the highest recorded share price for Ford Motor Co. since June 3, 2002. Options on Ford are extremely well trafficked today with shares surging to new heights and the market eagerly awaiting rival General Motors Company’s public stock offering. More than 2.2 call options are changing hands on the stock for each single put in play out of the more than 704,650 contracts exchanged on the automobile maker as of 3:45 pm in New York. Nearer-term call options are the most active, with volume in November $17 strike calls exceeding 70,800 lots ahead of the closing, bell versus previously existing open interest of 45,757 contracts at that strike. The majority of those in-the-money call options were purchased for an average premium of $0.46 apiece. Call buyers at this strike make money if Ford’s shares exceed $17.46 ahead of expiration on Friday. Buying interest spread all the way up to the sky-high November $20 and $21 strikes. More than 5,000 of the November $20 strike calls were picked up for an average premium of $0.03 a-pop. The premium on these contracts will continue to rise as long as Ford’s shares head higher in the next 4 trading sessions, and may provide call buyers the opportunity to bank handsome profits ahead of expiration day. The December $20 strike calls were even more popular, with some 17,000 lots purchased at an average premium of $0.15 each. Bullish players were also seen selling in- and out-of-the-money put options across multiple expiries. Near-term November $16 strike puts were the most heavily populated as upwards of 53,250 contracts changed hands by 3:50 pm. Strong demand for the automaker’s option contracts, GM’s impending IPO and the sharp shift in Ford’s share price today helped lift the overall reading of options implied volatility on the stock 9.4% to 45.92% late in the session.
ALU – Alcatel-Lucent – The telecommunications equipment company was the target of bullish options activity during the first half of the trading session. It looks like one investor initiated a long-term optimistic stance on the stock by selling out-of-the-money put options in the January 2012 contract. Shares in Alcatel-Lucent are up 0.70% in early-afternoon trading to stand at $2.96 as of 1:10 pm in New York. The strategist sold 8,000 puts at the January 2012 $2.5 strike to take in an average premium of $0.37 per contract. The trader keeps the full amount of premium received on the sale as long as shares in ALU exceed $2.50 through January 2012 expiration. But, the transaction is not without its risks. The investor could wind up having 800,000 shares of the underlying stock put to him at an effective price of $2.13 apiece if the puts land in-the-money by expiration day. Thus, the put seller starts to absorb losses if ALU shares plunge 28.0% from the current price of $2.96 to breach the effective breakeven point at $2.13 before the options expire in 2012. We note that Alcatel-Lucent’s shares have traded above $2.13 since July 13, 2009.