Stock Options Watch: DMND, NVO, YHOO

DMND – Diamond Foods, Inc. – Call options on Diamond Foods, Inc., are changing hands at a clip this morning, amid a strong rally in the price of the underlying on above-average volume in the stock. Shares in the nut producer increased as much as 12.8% on Monday morning to $16.25, the highest level since mid-November. The stock currently trades up 10% on the session at $15.85 as of 11:55 a.m. ET. Traders positioning for shares in the name to extend gains this week snapped up bullish options on the stock. The Feb. $16 strike calls attracted the heaviest volume, with upwards of 4,100 calls in play versus open interest of 1,063 contracts. Time and sales data suggests the bulk of the $16 calls were purchased for an average premium of $0.23 apiece. Call buyer stand ready to profit at expiration in the event that Diamond’s shares rally another 2.4% over the current price of $15.85 to exceed the average breakeven point at $16.23. The higher Feb. $17 strike calls are also active today, with nearly 700 lots in play against open interest of 15 contracts. Traders paying an average premium of $0.15 apiece for the $17 strike calls profit at expiration this week as long as DMND shares rise 8.2% from the current level to top $17.15.

NVO – Novo Nordisk A/S – Shares in Danish drug maker, Novo Nordisk, are down 13.9% to stand at $165.58 as of 11:30 a.m. ET on Monday morning on concerns the U.S. Food and Drug Administration’s request for more data on two of Novo’s products will significantly delay the release of those drugs in U.S. markets. Options on the largest maker of insulin are more active than usual today, with volume topping 1,430 contracts during the first half of the trading session versus average daily options volume of around 225 contracts. Put selling on the stock suggests some traders expect the selling pressure to subside, at least in the near term. Upwards of 230 puts have changed hands at the Mar. $160 strike versus open interest of just 20 contracts. It looks like most of the put options were sold in the early going at a premium of $2.20 apiece. Put sellers keep the full amount of premium received on the position as long as shares in the drug maker settle above $160.00 at March expiration. Traders lose money, however, if shares in NVO drop more than 4.7% from the current price of $165.58 during the next five weeks to trade below the breakeven point on the downside at $157.80 by expiration. Shares in Novo Nordisk last traded below $157.80 in November.

YHOOYahoo!, Inc.Bullish options are changing hands on Yahoo this morning, with shares in the name up better than 2.3% on the day to hit a new 52-week high of $20.98 during morning trading. Traders positioning for shares in YHOO to continue to rise in the near term picked up February and March expiry calls on the stock today. Traders picked up calls at the Feb. $20 and $21.5 striking prices, paying an average premium of $0.18 and $0.07 apiece, respectively, in the early going. More than 2,200 call options are in play at the Feb. $21.5 strike against open interest of just 343 contracts. Traders shelling out an average premium of $0.07 apiece for the $21.5 strike calls this morning stand ready to profit at expiration this week should Yahoo’s shares rally another 3.0% to exceed the breakeven price of $21.57. The $22 strike call options expiring in March are active today as well. Traders appear to have purchased around 1,500 of the $22 strike calls for an average premium of $0.24 each, and may profit at expiration next month should Yahoo’s shares rise 6.0% to surpass the breakeven price of $22.24. The stock last traded above $22.24 back in July 2008.

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.

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