CVC – Cablevision Systems Corp. – A short strangle implemented on the cable operator during afternoon trading indicates one strategist expects shares in Cablevision Systems Corp. to remain range-bound through June 2011 expiration. Cablevision’s shares rose earlier in the day, but are down 0.35% to arrive at $34.57 as of 3:40pm in New York. It appears the strangle-player sold 20,000 calls at the June 2011 $38 strike at a premium of $1.25 each, and sold the same number of puts at the lower June 2011 $29 strike for a premium of $0.85 apiece. Gross premium pocketed by the investor amounts to $2.10 per contract. The trader keeps the full amount of premium received on the transaction as long as shares in CVC trade within the confines of the strike prices described through expiration day next year. Short stances taken in both call and put options expose the trader to losses in the event that CVC’s shares soar 16.0% higher to trade above the upper breakeven point at $40.10, or should shares plunge 22.2% lower to breach the lower breakeven price of $26.90 ahead of June expiration.
OSTK – Overstock.com, Inc. – The online retailer’s shares are up more than 4.4% in the final minutes of the trading session to stand at $17.22. Overstock.com made its way onto our scanners late in the trading day due to bullish activity in the front month. Investors expecting shares to continue to rally ahead of expiration day tomorrow purchased more than 1,500 calls at the December $17.5 strike for an average premium of $0.23 each. Call buyers profit if OSTK’s shares rally another 3.0% to surpass the average breakeven price of $17.73 by expiration. Options implied volatility on Overstock.com is up 12.5% at 54.96% as of 3:45pm.
AKS – AK Steel Holding Corp. – Call options on the steel producer are flying off the shelves today with shares in AK Steel Holding Corp. rising as much as 5.8% during the session to an intraday high of $15.25. Trading traffic in AK Steel calls is heaviest at the January 2011 $19 strike where more than 10,400 contracts changed hands by 2:00pm in New York, versus previously existing open interest of just 677 contracts. The overwhelming majority of the calls were purchased at an average premium of $0.06 apiece. Roughly half of the volume at that strike was picked up by one investor who paid $0.06 to take ownership of 5,500 of the calls. The transaction positions the investor to benefit from continued bullish movement in the price of the underlying shares through expiration day next month. Premium on the calls will appreciate if shares rise in value, which may create opportunities for the investor to profit should he choose to sell the deep out-of-the-money contracts for more than the $0.06 apiece paid during the current session. But, the calls will land out-of-the-money and thus expire worthless next year unless AK Steel’s shares rally more than 24.6% to trade above $19.00. In-the-money calls at the January $15 strike and calls at the January 2011 $16 strike are generating significant volume today, as well. Shares in AK Steel Holding Corp. last traded above $19.00 back on April 26, 2010, and reached a 52-week high of $26.75 in January 2010.