Options Activity Alert: MFC, MDVN, MOS

MFC – Manulife Financial Corp. – The single largest options trade on Canadian life insurer Manulife Financial Corp. suggests one strategist is positioning for the price of the underlying to potentially post double-digit gains in the first half of the year. Shares in MFC currently trade 1.6% higher on the day at $12.36. The stock rose around 6.0% this week, helped higher in part by speculation and rumors the financial services may be interested in acquiring ING’s Asian and European insurance and investment management businesses. ING last week announced it hired J.P. Morgan and Goldman Sachs to explore a sale of the units. Takeover chatter aside, Manulife’s shares have moved up sharply in 2012, rising nearly 20.0% in the three weeks elapsed since the year began. One options trader looking further gains in the stock through June expiration initiated a bull call spread today. It appears the investor purchased a 7,500-lot June $13/$16 call spread for a net premium outlay of $0.80 per contract. Profits are available on the spread if Manulife’s shares rally another 11.7% to surpass the average breakeven price of $13.80, while maximum potential profits of $2.20 per contract require a nearly 30.0% upward move in the stock to or above $16.00 by June expiration. MFC is scheduled to report fourth-quarter results ahead of the opening bell on February 9.

MDVN – Medivation, Inc. – The San Francisco, California-based biopharmaceutical company popped up on our market scanners this morning after a sizable position was initiated in February contract call and put options. Shares in Medivation are off slightly today, down 0.50% at $51.97 as of 12:10 p.m. ET, adding to declines realized earlier in the trading week. The stock has dipped 8.0% since Tuesday on news Medivation and Pfizer ended their collaboration on an experimental Alzheimer’s drug. It looks like one strategist sold 3,875 far out-of-the-money calls at the Feb. $65 strike in order to buy the same number of puts at the Feb. $40 strike, all for a net premium of $0.15 per contract. The trader may be taking an outright bearish stance on the stock or could be using the options play to hedge a position in the underlying shares. The sale of the call options greatly reduces premium required to get long the puts and suggests the investor sees greater potential for shares to pullback rather than rally to fresh all-time highs in the next five weeks to expiration. Profits or downside protection kick in if shares in Medivation plunge 23.3% to breach the effective breakeven price of $39.85 by expiration day. MDVN’s shares traded no higher than $25.50 during most of 2011, until early November when the stock more than doubled on promising Phase-III trial results for its prostate cancer drug.

MOS – Mosaic Co. – Bullish movement in shares of Mosaic Company may continue next week, according to buyers of weekly call options on the producer of concentrated phosphate and potash crop nutrients. Mosaic’s shares rallied more than 2.4% to $55.15 in the first half of the session on positive comments regarding the industry from analysts at Bank of America, who reinstated a ‘neutral’ rating on MOS and some of its competitors. Near-term bullish positioning in weekly calls is heaviest at the Jan. ’27 $57.5 strike where more than 1,200 options changed hands against open interest of 30 contracts. The majority of the calls appear to have been purchased for an average premium of $0.29 apiece, thus preparing buyers to profit at expiration next week should the price of the underlying stock rally 4.8% to surpass the average breakeven price of $57.79. The Plymouth, Minnesota-based Company’s shares have gained nearly 7.0% so far in 2012.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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.

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