- For reason highlights of big winners MBLY, PNRA, VRTX, SFM and FMC see this post “Options Flow Catching One Big Move after Another”
- In July, August, and September the OptionsHawk premium service was consistently noticing large January 2018 call buys in Financial stocks and wrote an article regarding his trend on SeeItMarket.com. Since that time the group has been the strongest in the market with massive gains, and the results of the large call positions are shown below (click to enlarge):
- On November 28th, 2016 Cognizant Tech (CTSH) shares jumped sharply after Elliott Mgmt. unveiled an activist stake, not long after a 9-26 Options Radar highlight as well as daily updates of building April $55 calls to the sum of more than 30,000 contracts! “Cognizant Tech (CTSH) trading 3,000 Jan. 2017 $57.5/$50 bull risk reversals to open at $0.10 debit, and comes ahead of peer Accenture (ACN) earnings this week. CTSH has been under pressure lately but put in a reversal base near $53 and forming a weekly wedge down back to near the 200 week EMA and support from a reversal earlier this year, a pattern that could see a major breakout if shares clear $60 resistance. CTSH has seen some positive options flow since the sell-off including 3,400 November $45 puts sold to open. The $33B Tech Company trades 14.7X Earnings, 2.55X Sales, 3.35X Book and 19.9X FCF. Revenue growth has slowed from 15-20% annual in 2012-2015 to right around 10% and EPS growth the same, some future growth concerns with automation/robotics impact on its businesses. Analysts have an average target of $66.75 on shares, and short float is just 1.1%. Goldman cut shares to Neutral on 9-15 with a $61 target, but did note CTSH is positioned best in IT Services with its focus on Digital services and software platforms, though industry-wide and vertical-specific headwinds remain in the near-term. Overall weaker enterprise spending the next 6-12 months may weigh on its ability to expand the multiple, but it could be boosted by capital allocation moves. Wedbush started shares Neutral with a $65 target on 9-9 citing Health Care provider M&A and Brexit exposure impacting FY16 growth. Barron’s was out positive on CTSH last week as well as a great long term business with some near-term headwinds, and notes it’s wide moat with 40% recurring revenues and 95% customer retention rates. Institutional ownership fell 1.47% in Q2 filings.”
- On November 14th, 2016 Mentor Graphics (MENT) received a buyout offer from Siemen’s in a $4.5B deal, shares jumping to $37 from $30, and an Options Radar featured to members on 10-12-16 as follows: “Mentor Graphics (MENT) with a buyer of 1,450 April 2017 $30 calls for $1.50 in a stock replacement, and trading 2,080 on the day. MENT also saw unusual opening buys of 3,200 Jan. 2017 $30 calls at $0.50/$0.55 on 10-4. Elliott Management is seeking talks with management on improving operational efficiency and margins at the $2.9B software company after disclosing an 8.1% stake. MENT shares have rallied nearly 30% since August and approaching 2015 highs. The $2.9B Company trades 14.65X Earnings, 2.62X Sales, 2.41X Book and 23.9X FCF with a 0.81% dividend yield. MENT is forecasting accelerating revenue growth through 2019 and EPS growth of 8.6% this year, and then 10% in 2018 and above 15% in 2017. MENT is coming off a solid quarter with Emulation driving upside, particularly in networking, and despite weakness in Semi customer renewals due to M&A in the sector. Automotive Products is a strong area for EDA design and MENT also benefitting from the IoT trend as big data cloud networking is stimulating big digital design activity that requires emulation. Analysts have an average target of $26 and short interest has been rising to 6.6% of the float. DA Davidson upgraded to Buy on 10-10. MENT has a very active schedule of Conference events in October and November, and next reports on 11-17. Institutional ownership jumped 4.5% in Q2 filings.”
- On November 20th, 2016 Lifelock (LOCK) agreed to be acquired by Symantec (SYMC) for $2.3B and shares soared, not far after a 10-21 Options Radar report to members as follows: “Life Lock (LOCK) with an unusual buyer of 2,500 Jan. 2017 $18 calls at $0.90 to $1.05, and does still have 2,500 of the $15 calls still in OI, and the Jan. 2017 $16 puts in OI traded on 8/31 versus a stock position. LOCK has been a bit of a comeback story since May and shares today moving up to multi-month highs, clearing a downtrend off its prior major highs, and can push back to those $21 record highs. LOCK will next report earnings on 11-1. The $1.58B identity protection Company trades 18.3X Earnings, 2.5X Sales and 7.2X Book. LOCK is projecting double digit revenue growth through 2018 and EPS growth above 20% annually. Short interest is elevated at 13.7% of the float, but has declined since peaking last July. Analysts have an average target of $19 on shares. Elliott Mgmt. has boosted its stake in LOCK to 10.9% and has been pushing for a potential sale of the company. LOCK hired Evercore to explore a sale in August. Goldman was out Neutral on 8-15 and saw M&A as the primary driver. Wunderlich raised its target to $20, a base case valuation of 2.5X FY17 revenues in a sale. Institutional ownership jumped 4.3% in Q2 filings, Melvin Capital disclosing a new call option position.”
- On November 7th, 2016 Blue Nile (NILE) announced it would be acquired by Bain Capital for $500M, a 33% premium, just 4 days after an Options Radar report to members on 11-3-16 with the following: “Blue Nile (NILE) set to report on 11/7 and seeing unusual February 2017 $35/$40 call spreads open 570X and action continues this morning with 1,150X now trading, buyers paying $1.45 to $1.50. NILE is a bit of a forgotten name, but shares have performed well since the July base breakout, and now bull flagging on the weekly just below $36. The $400M retailer of jewelry online trades 36X Earnings, 0.85X Sales and 10.9X Cash. NILE will next report on 11/7, and a name I often thought of as a nice small bolt-on acquisition target for Amazon (AMZN), but just speculating. NILE is forecasting roughly flat revenues as growth has slowed since 2014, and EPS seen climbing to $0.95/share in 2017. Short interest is 6.7% of the float and has come down sharply from the start of the year. Mark Vadon, the former CEO and co-founder, disclosed a 5% stake in June. Institutional ownership fell 2.94% in Q2 filings. “
- On November 2nd, 2016 Broadcom (AVGO) announced a $5.9B deal for Brocade (BRCD), and shares rose up near $12.50 from the $8.65 level, a sizable gain, and one alerted to members for unusual call buying on 10-14-16: “Brocade (BRCD) with a size buyer of 10,000 January $9 calls for up to $0.64 this morning and follows over 4,500 November $10 calls accumulating recently. BRCD shares are trading back at $8.75 support and trading in a large wedge on the weekly with room back to $10-$10.25. The $3.59B company trades 8.8X earnings, 1.58X sales, and 12.9X FCF with a 2.49% dividend yield. BRCD is expecting 2-3% sales growth in 2016 but ramping to 10.7% Y/Y growth in 2017 with EPS rising to $1. BRCD topped estimates in August with strength in their IP Networking business, which rose 36%, helping offset weakness in their SAN Products business, which comprises 48% of total revenues, fell 9%. BRCD held an Analyst Day recently and outlined priorities for FY17 which include added partnerships in software and greater synergies in their Wired/Wireless portfolio and could see more tuck-in M&A to improve growth. The company is guiding to 66.5-67.5% gross margins. Analysts have an average target for shares of $10 with 4 Buy ratings, 17 Hold ratings, and 1 Sell rating. Shares were recently started Buy at DA Davidson, $12 PT saying the Company is strong at both Ethernet and Fibre Channel markets, and the addition of Ruckus strengthens its position at the edge of the network, providing an end-to-end network solution. Argus was out positive on 8-31 noting that Ruckus and other niche assets such as SteelApp increase Brocade’s ability to steer traffic toward its core data center products. Institutional ownership rose 3.27% in recent filings with short interest at 2.82% of the float, down from over 5% in May.”
- On July 28th, Oracle (ORCL) announced a $9.2B for NetSuite (N) at $109/share cash. N was a name I was highlighting to clients as a likely acquisition target since April and backed up by constant options flow and the skew structure while shorts were closing positions. The deal resulted in a massive profit. The original write-up in April was as follows: “NetSuite (N) traded more than 3,500 calls on the day, mostly in the last hour of trading, ahead of earnings on 4-28. The June $80 calls were bought $3.80 to $4.30 for over 600 contracts, the June $90 far OTM calls bought throughout the day $1.40 to $1.50 for 845X, the July $80 calls with over 700 bought in the last 30 minutes aggressive at $4.80 to $5, and July $90 calls traded 674X at $1.85 to $2.05, unusual aggressive OTM action. Into earnings NetSuite (N) IV Skew is showing a bullish parabolic shape, May options pricing in over an 8% move. N also saw elevated call activity the last three days of last week. Shares jumped 5.77% last quarter on results, a max move of +11.14%, though shares have closed lower 3 of its last 5 reports. N also is seeing increased stock volume the last 4 sessions, so a combination with the high call volume and IV Skew, often a precursor to M&A. Short interest is at 8.15% of the float, a sharp drop from 20.6% in February. N could also be an acquirer, and may look to a name like Marketo (MKTO).NetSuite has a $6.13B market cap trading 8.28X Sales and 5X FY17 EV/Sales. N is targeting 25%+ forward revenue growth each of the next two years after posting 30-35% the last 5 years. The leading provide of cloud-based financials / Enterprise Resource Planning and Omni-channel software suites also has software in Customer Relationship (CRM), Professional Services Automation (PSA) and Human Capital Mgmt. (HCM). N has a diverse customer base with no single customer accounting for more than 3% of total revenues. Its top competitors are Epicor Software, Intuit (INTU), Microsoft (MSFT), Oracle (ORCL), SAP AG (SAP), Sage Group, Salesforce.com (CRM), and Workday (WDAY). Many of its top competitors are large cap Tech companies flush with cash, so NetSuite’s leadership and strong growth may make it an attractive takeover target. DA Davidson was out ahead of earnings this morning reiterating a Buy and $130 target, expecting 30.4% Y/Y billings growth. In late January Canaccord raised shares to Buy with a $100 target, noting strong product demand and finally beginning a margin ramp. Institutional ownership rose 5.7% in Q4. On the chart shares have rallied nearly 50% from February lows, now the 200 day MA downward sloping overhead at $80.15 strands in the way as resistance, followed by a 50% Fibonacci retracement at $82.60, and weekly cloud resistance at $90. An 8/20 week EMA bull crossover is triggering near $72 as support on weakness.”
- On June 20th, 2016 we highlighted sizable bullish positioning in WhiteWave Foods (WWAV). On July 6th, Danone announced a $10.5B offer to acquire WWAV, causing a 20% rally in WWAV and sizable profits in the option positions. The Options Radar report was as follows: “WhiteWave Foods (WWAV) buyers today of 2,500 October $50/$40 bull risk reversals for $1.03 to $1.07 debit to open and also seeing traders roll 1,750 July $47.50 calls out to August $52.50 calls which open at $0.50 to $0.65, continuing to position for upside. WWAV has some notable short puts in open interest including 5,000 October $37.50 puts (risk reversal with $47.50 calls) and 5,000 January $35 puts last week. WWAV shares are breaking out of a bull flag over $46.89 today and on a weekly basis over $47.50 room back to the July highs at $52.50. Shares pulled back to the 50% Fibonacci from the four-year bull trend in February at $32.50. The $8B organic food company trades at 28X earnings, 2X sales, and 6X book with earnings growth of 18-20%. The maker of Silk and Horizon organic dairy products posted a strong report in May with revenue up 14% with strong sales momentum from recent acquisitions Vega and Wallaby. Wells Fargo raised estimates on 5-13 with a $50-$52 target with sales of yogurt and frozen dessert products an undervalued opportunity. Maxim raised their price target to $55 on 5-10 seeing FY guidance conservative as their accretive deals continue to outperform and the fresh products business accelerates. Institutional ownership rose 2.88% last quarter, notable buys from Apex Capital. Short interest is 5.67%, down from over 7% in February. WWAV has long been considered a prime M&A target for Coca-Cola (KO) who is looking to revitalize growth and lacks a strong footing in the organic space and recent legislative pushes into sugary drinks and drive away from carbonated beverages, especially is the US markets, could be a catalyst to explore a deal.”
- On June 15th, 2016 we highlighted sizable call buying in Hershey (HSY), and continued to monitor the daily action as more call buyers came in for size daily. On June 30th, 2016 Mondelez (MDLZ) offered to acquire Hershey (HSY) in a $23B deal at $107/share, sending HSY shares surging to as high as $117. The results was a large profit in the call options. The Options Radar reports was as follows: “Hershey (HSY) continuing to see aggressive, bullish flow today with more than 8,750 July $100 calls trading up to $1.70 here after early buyers of 5,000 starting at $1.66 and later 2,000 August $110/$85 bull risk reversals traded for $0.10 debit where 2,000 were bought yesterday. HSY has seen IV surge recently and up another 4% today. Skew for July has inverted with the action, bullish signal. Shares broke out of a multi-month range last week over $96 and now consolidating with a measured move to $102.50. On a longer-term chart, shares are forming a bull flag with a longer-term move toward $125. The $20.6B maker of chocolate and other confectionary products trades at 21.22X earnings and 2.8X sales with a 2.41% yield. Earnings are guided to grow 7-8% through 2020 although weak growth since 2011 and cutting their FY view last quarter. HSY has been diversifying its offerings with Americans cutting back on high sugar products by buying Krave Pure Foods in 2015, a potential $500M brand for the company. HSY has long been in rumors as an M&A target with their stable of iconic brands and more than $7B in sales and recent talk surrounding Nestle who could look to consolidate to better compete with Mars/Wrigley and Mondelez/Cadbury. Citigroup was out cautious this morning on the potential for a deal noting regulatory hurdles and the control of the Hershey Trust who halted an auction for the company in 2002. Short interest is 4.27%, rising recently from around 2.5%. Institutional ownership rose 2.3% last quarter, notable buyers include Gotham Asset Management who bought 500,000 shares. “
- On May 31st, 2016 we highlighted an unusual large out of the money call buyer in Linked-In (LNKD) with shares trading at $137. On June 14th, Microsoft (MSFT) announced a $26.2B deal for LNKD at $196/share, a sizable quick profit for following these trades. The exact write-up for the Options Radar was as follows: “Linked-In (LNKD) shares very strong today and 2,500 November $180 far OTM calls with sweep buyer at $3.20 around 1pm, shares moving into its large earnings gap. On 4/27 a trader sold 750 of the November $130 puts to open in a large $1.8M put sale, and on 4/25 a buyer of 1,000 Jan. 2017 $150 calls added to open interest at $8.65. The long term LNKD chart shows a stock that dropped sharply to find support near $105 which was a retest of a key breakout level from 2013. LNDK remains an out of favor growth stock, but looking to come back into favor. The $17.25B Company trades 31X Earnings, 5.35X Sales and 3.78X Book with $3B in cash. LNKD revenue growth has slowed Y/Y since 2013, but still well above market norms expecting 17-20% revenue growth through 2018, while EPS growth seen at 20-22.5% the next two years and jumps to 30% in 2018, expecting to earn $5.55/share in 2018. In its latest quarter Talent Solutions saw strong growth, while Marketing Solutions and Premium Subscriptions modest growth. Key metrics like Unique Members and Page Views all hit record highs last quarter, and mobile unique visitors jumped 25% Y/Y. Analysts have an average target on shares of $164 with 21 Buys, 18 Holds and 1 Sell. Short interest at 3.9% of the float is up 31.8% over the past 3 months. Linked-In’s Lynda announced a new partnership with Tableau (DATA) last week, and DATA is seeing unusual buys of 3,000 January 2018 $100 calls today, possibly eyeing a merger down the road. LNKD is a combination of a Tech name in large markets with limited competition, strong management, and a name with extreme pessimism due to Q4 results. Net member adds of 19M in Q1 was the highest in 2 years and the revamped app is increasing engagement. Cantor Fitzgerald has a $220 target on shares. Hiring Solutions, the core business for LNKD, is seeing growth decelerate, but other divisions are showing rapid growth. CSFB has a $176 target and sees headwinds unwinding in Q1 2017 and notes strong enterprise customer traction, growing contribution from Sponsored Updates, Sales Navigator ramping, and accelerating user engagement as reasons to be bullish. Institutional ownership fell 6.95% in Q1. On the chart LNKD is still looking to close its large gap from Q4 results, but the recent $110/$130 flag measures to a near-term target of $150.”
- On March 18th, 2016 we highlighted bullish options positioning in Medivation (MDVN) when shares were trading $35.40. In late April, Sanofi (SNY) announced an offer to acquire MDVN at $52.50 per share, and MDVN traded as high as $62.50, an enormous profit on the trades. The following was the full Options Radar write-up: “Medivation (MDVN) with an opening buyer this morning of 3,000 April $41 calls for $1.10 to $1.12, nearly 4.5X average call volume with IV climbing for the month. MDVN saw an opening sale of 3,000 June $34 puts yesterday from $3.40 to $3.30, often a strong indicator in the healthcare group. Short interest is 2.46%, falling since July when it was over 5% and well off of 10-year highs. On 3-9, the FDA lifted a partial clinical hold on the company’s IND pidilizumab which is currently in Phase 2 trials. The cancer drug is being developed for patients with relapsed or refractory diffuse large B-cell lymphoma. The $5.82B biotech trades at 17.29X earnings, 6X sales, and 25.75X cash with 25% earnings growth. The company showed 37% revenue growth in February. MDVN is ramping up their sales and marketing for their prostate cancer drug Xtandi, a more than $1B annual revenue gainer for the company, in an effort to overtake JNJ’s Zytiga. Wedbush highlighted the drug’s potential last Spring and noted market opportunity puts MDVN on the M&A radar for larger names looking for growth. Institutional ownership rose modestly last quarter. Knoll Capital a notable holder with 4.4M shares, their largest holding, while Discovery Capital also holds 3.5M shares. On the chart, shares have been in a long downtrend off the March 2015 highs but rallying recently and pulling back to the 50-day MA at $36. Shares are forming an inverted head and shoulders look with a break over $40 measuring up to $52.”
- On March 20th, 2016 Sherwin Williams (SHW) announced an $11.3B deal for Valspar (VAL) at $113/share cash with Valspar having closed at $83.83. VAL was a name consistently highlighted to clients with unusual options activity. It started on 12-3-2015 when 1,600 April 2016 $90 calls were bought to open at $2.05 to $2.10 with shares trading $83. A teaching note, VAL shares hit as low as $73 in early January 2016, and 99% of the time one can get into these smart money positions at a much better entry, even though this call buyer will make nearly $3.7M, the value of the position earlier this year was basically worthless. On 1-8-2016 a trader bought 2,500 April 2016 $90 calls at $1.45 to open, rolling out of January $90 calls that were sold for $0.25. Those two trades account for 4,400 of the current 5,041 contracts in open interest. VAL was a name, however, that saw unusual call buying on nearly a daily basis, a name with fairly wide bid-ask spreads that saw traders consistently paying the offer and even through the offer to grab OTM contracts. The April $85 calls have around 3,500 contracts in open interest, a trader on 2-1-16 bought 1,000 at $1.50, and on 2-18-16 a trader bought 800 contracts at $2. The April $80 calls have 5,439 contracts in open interest, starting on 2-5-16 when a trader bought 700 contracts at $3.80 to $4, added 1,400 contrracts the next trading day on 2-8 at $3.60 to $3.90, then another 1,000 contracts the next day at $4 to $4.70, and 900 more on 2-10 at $4.60 to $5.20. On 2-12 1,300 more were bought at $3.50 to $3.70, steady accumulation accounting for 5,400 contracts. A massive trade as recent as last week on 3-17-16 bought 6,000 July $80 calls at $7.75, a $4.65M trade that stands to profit $15.15M.
- Syngenta (SYT) was featured in a 3-9-15 Options Radar report and a couple months after Monsanto (MON) made a takeover offer for shares, sending them soaring, an example of tracking unusual, not necessarily large options action:
“Syngenta (SYT) buyer 1,000 September $75 calls $1.50 offer, aggressive on wide bid-ask of $0.35 to $1.50, and on 3-4 a buyer paid up at $2.95 for 700 September $70 calls, very interesting action at 20X daily call average today, and in the past Monsanto (MON) was looking to merge with SYT. The $31.5B Swiss agricultural chemicals Co. trades 16.3X Earnings, 2.08X Sales, and 3.46X Book with a 3.4% yield, so a strong case for a long term own as well on valuation and yield. On 1-12 Miller Tabak raised shares to Buy with a $74 target seeing raw material cost savings helping the bottom line. It was reported last year that SYT/MON held preliminary talks for a $40B deal, though Monsanto has now done a $10B buyback, though Syngenta could not look to become the acquirer for Dow Chemical’s agricultural business, or DuPont (DD) could also be interested in a merger.”
- Dunkin Foods (DNKN) has been a top performer this year with shares up nearly 30%, and was featured in a 1-13-15 and 3-18-15 Options Radar report:
“Dunkin Brands (DNKN) opening buyer 6,000 May $52.50 calls at $0.55 to $0.60, trading 3X daily calls with IV rising, and a name with over 9,000 June $50 calls in OI from buys and sizable March $47.50 call OI remains. DNKN shares have shown relative strength lately and the key is to clear $48.60 resistance, already having moved out of a long channel down pattern, and can make a run back to $52 highs from early 2014. The $4.67B Co. trades 21.84X Earnings, 6.24X Sales and 59X FCF with a 2.2% yield and double digit EPS growth, but has been cutting guidance the last two quarters. CSFB rated DNKN Outperform with a $56 target last week, and TAG raised to Buy on 2-6. DNKN expectations have been reset and with a strong expansion story still alive in the US, likely a good time to be involved. Institutional ownership in DNKN fell 3.37% in Q4.”
- Pinnacle Foods (PF) shares have been pushing strong to new highs since the options market turned bullish, a 5-19-15 Options Radar report:
“Pinnacle Foods (PF) buyer of 2,000 December $42.50 calls to open $2.20 to $2.25, strong chart and Food M&A been a theme in 2015. PF shares have seen strong accumulation since March, and broke out of a bull flag late last week with strong follow through this week. CSFB noted in March that PF could look to acquire Green Giant from General Mills (GIS), an accretive deal the market would likely cheer. The $4.93B Co. trades 20.5X Earnings, 1.9X Sales and 15.65X FCF with a 2.22% yield. PF is looking to boost revenue via innovation in its healthier food lines and in meetings with Morgan Stanley said it would consider acquisitions of up to $2B. On 4-28 RBC raised its target to $45. Institutional ownership in PF rose 1.46% in Q1, JANA Partners a notable buyer of nearly 5M shares. “
- Interactive Corp (IACI) has been a big winner in 2015 and shares up more than 30% YTD, a name highlighted many times in the Trading Hub, also a 3-19-15 Options Radar report:
“Interactive (IACI) with bullish flow into October $70 calls, OTM and fairly pricey with 2,500+ being bought at $5.20 to $5.30, nearing $1M call premium bought, and a name with sizable OI in March $65 and $70 strikes as well as 6,550 July $75 calls, many expecting a spin-off of Match Group as a catalyst. IACI shares are consolidating after a strong February run and looking at $70 as a breakout level. The $5.8B Co. trades 17.35X Earnings, 1.87X Sales and 21.6X FCF with a 1.97% yield and looking at 30% EPS growth in 2015. IACI institutional ownership rose 0.65% in Q4, and Greenlight Capital and Third Point are two of its largest holders. Axiom initiated IACI at Buy with an $80 target on 3-3, noting Tinder monetization and potential for Match Group spin-off with a $93/share sum of the parts value.”
- Infinera (INFN) has been a top performer in Tech this year with shares up more than 30%, and back on 3-26-15 the hot options action started and continued for weeks, the Options Radar report was as follows:
“Infinera (INFN) with the first hot action of the day as 3,000 May $18 calls are bought to open at $1.35 offers and IV30 spiking 13.7% higher, a name with large OI in April $13, $14, and $15 calls from large buys and shares now back to the prior breakout level and bouncing in the face of a weak tape. INFN has been posting great numbers and the optic space overall has been a strength area of Tech also seeing M&A opportunities. The $2.28B Co. trades 25.2X Earnings, 3.4X Sales and 4.65X Book with 20%+ EPS growth projected 3-5 years ahead. Stifel was out with a Buy rating and $19 target in late January. INFN will next report earnings around 4-22. MKM put a $23.50 target on shares on 3-10 with confidence in upside to estimates. Institutional ownership in INFN surged 12.6% in Q4.”
- Broadcom (BRCM) was a name we were on top of in the Trading Hub, and on 5-7-15 wrote an in depth Options Radar report, and the Company was soon after acquired by Avago Tech (AVGO) in a big Tech M&A deal:
“Broadcom (BRCM) with a buyer of 1,500 August $47 calls for $2.12 offer after 1,000X November $46/55 call spreads were opened earlier and 2,000 of the May 29th (W) $46 calls were bought on 5/4 and 5,000 November $47 calls still sit in OI from 4/7. BRCM shares jumped on earnings recently and held the 30/50 EMA cluster on a re-test with a big breakout over $47 above that measures to $52 target. The $27.21B semiconductor trades 14X earnings, 3X book and yields 1.23% with double-digit earnings growth forecast over the next five years. BRCM recently reported very strong earnings, one of few chip-makers to do so, including a surprising turnaround in their connectivity segment driven by better adoption rates of high-end smartphones and new product rollouts. Credit Suisse recently said the company was one of eleven takeover targets it was watching as the smartphone revolution becomes a major driver of M&A going forward and shares jumped on 4/9 on speculation that Intel (INTC) may expand its M&A sights if it fails to acquire Altera (ALTR). On 4/22, J.P. Morgan reiterated their Overweight rating and raised their price target to $59. Institutional ownership fell moderately last quarter”
- Altera (ALTR) was featured in a 1-13-15 Options Radar report and the action positioned perfectly for an eventual buyout offer from Intel at a big premium:
“Altera (ALTR) opening buy of 10,000 Jan. 2016 $37 calls at $3.50, closes out 6,000 of the January $32 calls. Altera (ALTR) now with a buyer of 9,000 June $36 calls at $2.65 as 5,000 January $34 calls close $2.40. ALTR bulls that caught the bottom are expecting the move higher to continue and trading 30,000 calls today, 15X average. ALTR is in a multi-year sideways channel of $30/$38.50, and looking for shares to potentially breakout this year, next earnings on 1/22. The $11B Semi trades 20.15X Earnings, 5.78X Sales, and 3.35X Book with a 2% dividend yield and looking for earnings to reaccelerate, a change last year as it took over XLNX for reporting stronger results. On 12-11 RBC reiterated Outperform with a raised $43 target. ALTR is also a margin expansion play, and currently IV at the 51st percentile. ALTR institutional ownership rose 1.79% in Q3.”
- Kraft (KRFT) was a name that saw notable call buying and wrote an Options Radar report on 1-15-15, and the Company shortly after was acquired in a massive M&A deal:
“Kraft (KRFT) with 1,000 March $70 calls bought and action in January and June calls as 30 day IV rises 15%, trading more than 2X daily calls the first 45 minutes, and $315K call premium bought. KRFT has seen a lot of call buying the past few weeks, most notable the March $65 calls with over 8,000 in OI that have been accumulating. KRFT shares are breaking out of consolidation today after a Goldman upgrade. The KRFT note mentions an $81 sum of the parts valuation with the Company 50% Grocery, 40% Cheese and Meat, and 10% Coffee, and sees a 30-50% chance of M&A. KRFT will report earnings 2-13 and should see margins benefit from lower meat and dairy prices and also is under new leadership. The $37B Co. trades 18.7X Earnings and 2X Sales with a 3.5% yield and 5%+ EPS growth. Institutional ownership in KRFT fell 1.45% in Q3 and did not show up under any notable funds as top holders.”
- Palo Alto (PANW) shares are up more than 40% YTD and the trend was caught early with an Options Radar report back on 3-9-15, and the position has been rolling out and up ever since:
“Palo Alto Networks (PANW) trading 3X daily calls on the day with notable action in April $145 calls where over 3,500 are trading with some sizable buys in the $2.75 to $3.20 range, a contract that already saw 3,800 accumulate in OI since 2/26. PANW has sold off four straight days, but coming off another impressive growth quarter and in the strongest Tech trend, network security. The $11.58B Co. trades 90.5X Earnings and a more appropriate measure for a super growth name at 15.4X EV/Revenues. Last week Street targets included $170 at Barclays and Deutsche Bank and $165 at Piper. PANW has posted three straight quarters of 50%+ revenue and billings growth, and also is seeing margin expansion. Institutional ownership in PANW rose 5.2% in Q4.”
- Sun Edison (SUNE) shares are +50% YTD and back on 5-5 before a strong rally I posted an Options Radar report:
“Sun Edison (SUNE) a name that has not seen a lot of damage and touched the rising 50 day EMA today, and buyers now coming in strong for 10,000 June $25 calls at $1.52 to $1.59 and 5,000 July $26 calls at $1.56 offer, very large bullish flow ahead of 5/7 pre-market earnings. The $7.05B Co. trades 2.84X Sales and has become tough to value, more of a holding Company now with its spin-offs. SUNE was one of the longs in Greenlight Capital’s latest letters. SUNE is rated Buy at RBC with a $33 target and Buy at Cowen with a $31 target. Institutional ownership in SUNE rose 5.78% in Q4, Point 72, Glenview, and Third Point LLC big buyers, so a name with a lot of whales involved. Leon Cooperman and Hoplite are also big holders of SUNE. Last quarter SUNE showed 2.6GW backlog and 5.1GW pipeline, and an Emerging Markets Yield-Co is a potential catalyst, while cash flow trends and pricing commentary will be key to the earnings call. “
- Electronic Arts (EA) has been a top performer in 2015 and shares up 50% YTD, but back on 5-21 I released an Options Radar report:
“Electronic Arts (EA) with 3,000 weekly $57 calls bought to open ITM at $1.29 offer, shares remaining strong in a narrow range for months, but earnings not until 5/5. The action is odd without any near-term catalysts expected, but a big opening buy for 5,000 June $60 calls at $2.07 comes in now as well, trading 4X daily calls in early action. EA is looking to come out of this range and attack 10 year highs near $62.50. The $17.75B gaming Co. trades 21.75X Earnings, 3.99X Sales, and 16.6X FCF. EA has seen Y?Y revenue growth decline the last three quarters, but generally has a strong Summer release schedule. Needham cut shares to Hold from Buy on 3-10. EA has benefitted from a strong console cycle, though valuation looks fairly full, unless Disney/Apple/Amazon was interested in pushing into gaming more. Institutional ownership in EA rose 2.8% in Q4. Stifel’s $59 target is the Street high, so this trade expects even more upside. “
- Fire-Eye (FEYE) is a stock up 55% YTD and one that options traders caught early before a big rally, a 2-12-15 Options Radar report said:
“Fire-Eye (FEYE) continuing higher post-earnings and earlier 2,000 June $43 calls bought at $2.96, rolled up from the $35 strike, while March $39 calls seeing large opening buys as well, 5,000 contracts bought near $2.65 to open. FEYE had plenty of bullish positioning into earnings including the 5,000 June $35/$45 call spreads in OI. FEYE shares are up 11% and after clearing $38 the next real resistance level is close to $42, while a longer term 38.2% Fibonacci retracement would be to $52.70. FEYE posted over 100% billings growth Y/Y and remains a main player in a top theme in Tech. The $5.37B Co. trades 14.6X EV/Revenues. FEYE does have 17M shares short, 14.5% of its float, but declining since October. Stifel boosted its target on FEYE to $48 this morning. FEYE margins and cash flow also beat expectations. Institutional ownership in FEYE dropped 10.7% in Q3.”
- Horizon Pharma (HZNP) is a stock that is up 170% halfway through 2015 and has often been mentioned in the Trading Hub with sizable call buys and bullish risk reversals. On 2-2-15 I issued the following report:
“Horizon Pharma (HZNP) with a buyer of 2,500 May $16/$22 call spreads at $1.88 after 1,500 of these spreads recently bought to open. HZNP shares recently ran up to near 2014 highs and pulling back to the 20 day EMA today down 4.6%, next earnings date 2-27 and also presenting on 2-10 at the BIO CEO Conference and 2-12 at the Leerink Conference. HZNP shares broke out of a range in early January and saw strong accumulation. The $1.95B Biotech trades 15.15X Earnings, 8.9X Sales, and 2.65X Book. On 1-8 Brean Capital started shares a Buy with an $18 target and Citi on 1-21 at Buy with a $19 target. HZNP has a proven track record in value-add acquisitions and is cheaper than peers on valuation. “
- Heron Therapeutics (HRTX) is a stock that is up 200% halfway through 2015 and is a name that was highlighted many times in the Trading Hub with unusually bullish options activity, both call buys and put sales. On 2-25-15 an Options Radar report was issued:
“Heron Therapeutics (HRTX) a new name to me as I see 4,000 April $12.50/$17.50 call spreads bought to open at $1.50 and 3,000 of these spreads bought yesterday to open as well. HRTX shares are flagging on the daily and looking to return to 2014 highs near $15. The $328M Biotech has a lead product SUSTOL for prevention of acute and delayed onset chemotherapy induced nausea and vomiting. HRTX trades 4X Book and 3.8X Sales. On 2-11 HRTX started Phase 1 studies of NTX-011 for treatment of post-operative pain. In November a Brean Capital Analyst rated HRTX a Buy with 400%+ upside. HRTX has guided Q1 2015 completion of SUSTOL Phase 3 trials, and if approved would be a big boost as the first to market. Baker Brothers own 2.6M shares, its 32nd largest holding.”
- MAKO Surgical (MAKO) received a $30/share buyout offer from Stryker (SYK) on 9-25-13 that sent shares 85% higher. MAKO was an Options Radar Report on 1-14-13 highlighting the January 2014 $15 calls at $1.20, and with the deal a $6.9 million profit. The full report details were as follows: “MAKO Surgical (MAKO) trading 5X daily calls with $595,000 call premium bought as 5,000 of the January 2014 $17.50 calls are bought to open at $1.15 to $1.20 with shares at $10.89. MAKO shares have been under heavy pressure with some weak earnings reports. MAKO shares are starting to re-test a former breakout and showing some signs of capitulation and bullish RSI divergence. The $512M maker of robotic equipment for orthopedic procedures trades 4.86X sales and 5.07X book with 26% of its float short. Goldman reiterated Neutral and a $14 target on 1-7-13. MAKO has plenty o future opportunity if it can execute, and highlighted the knee replacement market at the JP Morgan Conf. last week.”
- Vertex Pharma (VRTX) shares jumped 61.9% to $85.60 on 4-19-13, just 3 days after I highlighted unusual call buying and also went through the upcoming catalysts and other large positions in Open Interest. The VRTX May $60 calls were good for a 1,000% gain. Original Options Radar Report: “Vertex Pharma (VRTX) May IV jumps as 2,000 May $55 calls bought $4.15 and 4,000 May $60 calls at $2.35 to $2.50, bullish action with a near term catalyst expected, Phase 2 VX-661 + Kalydeco data to validate VRTX’s CF discovery platform. VRTX has seen a number of large trades in recent weeks; the April $57.50 calls bought $1.20 for 1,075 on 4-12, 3,500 May $60/$65 call spreads at $1.25 on 3-19, April $50/$40 bull risk reversal 5,000X on 2-28 at $0.10 credit, and the October $55 calls bought on 2-25-13, so options market expectations look to be positive. The $11.8B Biotech trades 7.72X Sales, 11.8X Book and 60X FCF, so very dependent on future drug outcomes. Chardan Capital initiated shares at Buy on 4-10-13 with an $80 target.”
- Zillow (Z) shares have climbed firmly off its lows and now up 30% in a month. With shares near new lows on 11-9-12 I highlighted unusual buying of 4,500 February $25 calls at $2.40 to $2.60. Those calls are currently priced at $11.50 and some positions rolled to higher strikes, but a 350% gain. Original Options Radar Report: “Zillow (Z) trading 4X daily calls with 4,500 February $25 calls bought to open at $2.40 to $2.60 for $775,000 call premium, Net Delta +150K, major bullish surge in options action with shares cut in half from the September highs, down big after the latest earnings report. Shares are back near post-IPO lows, and seems like an opportunity for a high growth name closely tied to the housing recovery. Shares were hit on a weaker than expected Q4 view. The $803M Co. trades 44.5X forward earnings, 1.86 PEG, 7.85X sales and sees 75% EPS growth for FY13, so one of the top growth names. Zillow does have 32.7% of its float short, so the calls may be hedging a short position. Barclays slashed its target to $35 on 11-6 and Benchmark to $40.”
- Cyberonics (CYBX) shares are down 16.85% in a month and comes after I first highlighted unusual put buying on 1-10-13 with the July $50 puts at $4.10 that then saw steady accumulation. The puts have gained to $9.50 from $4.10, more than a 100% gain. Original Options Radar Report: “Cyberonics (CYBX) drawing unusual put buying for the second straight day with 1,500 July $50 puts at $4.10 to $4.20 for $535K put premium. Cyberonics (CYBX)reaffirmed its 2013 outlook yesterday, but today traded 250X daily put volume as a block of 2,500 July $50 puts was bought to open at $4.10 with a $3.50/$4.10 bid-ask. CYBX has been a top performer the past year but could put in a topping candle this week after closing 3.4% lower today and back below the level it broke out past earlier this week. The $1.48B VNS Therapy medical equipment Co. trades at a rich multiple, 29.1X FY13 earnings, 1.8 PEG, 6.27X Sales and 21.5X cash flow. “
- I highlighted unusual call buying accumulating in Cymer (CYMI) in September and it was bought out for a 70% premium in October. The report from September was “”Cymer (CYMI) traded 2,175 calls on Friday which is nearly 20X daily average and 65% offer side for $185,000 in call premium purchased. The focus was on November $60 OTM calls with 2,089 bought against OI 494. On the long term chart CYMI shares are consolidating in a weekly bull flag near the upper end of a 10 year sideways channel that is 40 points in height, so a breakout past $60 could lead to significant upside. The $1.77B Semiconductor has held up much better than peers when the group was under persistent weakness and shares trade at a premium, 29.2X earnings, 3X sales, 2.23X book and 36X free cash flow with 8.75% of the float short. On 8-17 Deutsche Bank initiated Hold with a $58 target. BofA calls CYMI a product cycle story with strong long-term prospects. Cymer’s main customers are 3 OEM lithography manufacturers with ASML, Nikon, and Canon. CYMI is developing Extreme Ultraviolet (EUV) technology as the next generation light source. As a long term growth story CYMI could make a nice acquisition target with its $1.77B market cap.”
- On 7-24-12 I highlighted bullish call buyin in AuthenTech (AUTH) and recommended buying the stock. I noted “AuthenTec (AUTH) trading 3,350 calls which is 30X daily average with $110,000 call premium purchased, the October $5 calls hot with big buyers at $0.80 to $1.10 for 3,050 contracts and IV30 soaring 65% today. In the past week 1,000 of the Oct. 5 and Aug. 5 calls were bought in unusual action as well. I highlighted AUTH on the breakout past $4.10 back in May and shares are making multi-year highs today. Samsung recently chose AUTH for inclusion with its new Android phone and tablets, a built in security system, and with Apple (AAPL) expected to announce news on security for its products, possibly the call buying sees AUTH as a winner once again. There were reports in early June that AUTH could be in the next iPad. The $222M Co. trades 33.3X earnings, 3.1X sales and 4.4X book with no debt and is a forward looking growth play.” – Link to Report
Result: Just 3 days later AUTH shares rallied to $8.50 on a proposed takeover from Apple (AAPL) and a small $50,000 position reaped $30,000 in profits.
- On 6-14-12 I highlighted a bullish bias in ONXX ahead of a key FDA Event “Onyx Pharma (ONXX) trades a large spread in July with 3,600 of the $42 puts sold at $1.68 and 2,400 of the $48 calls bought at $2.57, near the offer. Back on 4-25 a trader bought 4,000 January 2013 $40 puts to open at $4.10, and on 6-5 a trader sold 2,440 July $42 straddles at $7.80. I would also note more than 5,000 OI in July $47 strike from 5-22 and 5-30 with the first 2,500 a June/July calendar call spread and the next 2,500 a roll-back of August $44 calls to that strike, so both positioned bullish into July. Onyx’s July IV is elevated at 60.7% with a wild IV Skew look due to a 6-20-12 FDA Panel. ONXX shares are hanging out near its recent highs with support seen at $42 and resistance near $47. The $2.93B Biotech has a lot of M&A chatter recently and positive results on 6-20 would likely boost the probability of that outcome. Shares trade 6.5X sales, 3.75X book and 4.9X cash value. On 6-8 BofA raised shares to Buy with a $57 target, and Goldman raised its target to $52 back on 5-3. The 6-20 FDA Panel is for its lead drug carfilzomib for Multiple Myeloma, and a final decision expected by 7-27. Traders are positioning for a big move in July and should see Briefing Documents released early next week.” – Link to Report
Result: I provided the July $46 straddle for $7 for a non-directional trade (+255%) and July $50/$55 Call Spreads at $1.15 for a Directional Trade (+335%).
- On 5-14-12 I highlighted bearish action in Linked-In (LNKD) options “Linked-In (LNKD) has been a resilient name today with shares up 3% in a weak tape, but trading 2.1 puts for every call, the June $105/$85 put spreads actively bought today for 5,500 contracts, traders paying $4.75 for the spreads, and more than $2.1M in put premium purchased today. It is possible that the Facebook IPO could take some funds out of LNKD to invest in FB, and also any signs of the jobs picture worsening may also cause Linked-In to reverse. Shares are currently in a strong uptrend but a break of today’s lows at $105.50 could start a sell-off back to $95. The $11.1B Co. is seeing great growth, but you are paying a premium at 89.4X earnings, 18X sales and 179X cash flow. Barclays raised its target to $125 on 5-4-12.” – Link to Report
Result: The $4.75 Spreads are Trading for $12 as of 6/4/12, a Large Gain and Called the Top in Shares
- On 4-26-12 I highlighted very bullish action in Expedia (EXPE) into earnings with “Expedia (EXPE) trades 430,000 shares of stock as 10,000 January 2013 $35 calls are bought to open at $2.575. The trade comes right ahead of earnings after the bell, a name that has sold off the last two reports. Expedia had a key breakout at the $30 level to start 2012 and since pulled back to the 20 week EMA. Expedia has a $4.3B market cap and trades 10.35X earnings, 1.25X sales and 1.96X book, a value name in the online travel group and 20.25% of the float is short. Stifel raised its target to $38 in February.” – Link to Report
Result: As of 6/5/12 the EXPE Calls are Trading $12, a 400% Profit
- On 2-23-12 I highlighted a very bullish trade in Cost-Co (COST) ahead of earnings, noting: “Cost-Co (COST) reports earnings next week on 2-29-12 and a trader puts on 4,700 March $85/$82.50 bullish risk reversals at $0.52 debit, bullish play as shares have based along its 20 and 50 day EMAs. More than $650,000 in call premium bought and $325,000 in put premium sold. Shares have closed lower each of its last 3 earnings reports, but remains a well-liked stock on the Street. The $36.67B Co. trades 19.25X earnings, 1.9 PEG, 0.4X sales and 3.1X book and stronger growth than most large cap retailers, potential positive read through from Target (TGT) results earlier today. Costco has continued to grow membership and International growth is increasing. Raymond James was out saying all the positives are priced in earlier in February and SIG said to buy put options, while Piper reiterated Overweight on 2-21 with a $97 target, and noted that with gas prices contributing 10% to revenues for Costco it could post strong results on recent price increases.” – Link to Report
Result: At March expiration COST shares reached new heights and these risk reversals gained 1200%, a $2.8M Gain
- On 2-22-12 I picked up on very unusual buying in P&G (PG) weekly calls, noting: “P&G (PG) very unusual with 11,900 of the February $65 weekly calls trading against OI 2,037, large buyers at $0.15 looking for a short term move higher. P&G presents at the CAG Conf. tomorrow at 12:30pm and recently sold it’s Pringles business to Kellogg’s. Shares recently held long term trend support off the prior lows and pulled back the last few days after rallying. The $177.44B Co. trades 14.7X earnings, 2.1X sales and 49.65X cash flow and could use tomorrow to announce guidance, or buybacks/dividend raises, already yielding 3.26%.” – Link to Report
Result: I told clients these calls were a great “lotto ticket” on the action. The next day P&G shares jumped 2.4% and the calls gained 1,000%
- On 12-15-11 I highlighted on Twitter to the public unusual activity in Altispurce Portfolio (ASPS) with 1,000 April $50 calls bought to open at $2.30, more than 50X daily average call volume. The link to the comment is at http://stocktwits.com/OptionRadar/message/6124128
Result: As of 2-24-12 ASPS shares are reaching new highs on a daily basis and the calls are up more than 600%
- On 1-3-12 I highlighted bullish action in a lagging stock, Devon Energy (DVN) with “Devon Energy (DVN) shares higher on news of a $2B+ deal with Sinopec out this morning, and traders positioning bullish with 5,000 April $67.50/$62.50 bullish risk reversals trading at $0.30 net credits. Options volume 2X daily average just 10 minutes into trading. Shares put in a double bottom recently and broke above its 50 day EMA today. The $25B Oil & Gas Co. trades 9X earnings, 2.3X sales and 1.2X book with a 1.1% yield. Barclay’s has an $85 target on shares, Overweight rated.”
Result: Devon shares jumped sharply in February on earnings and production cuts, reaching $75, the $0.30 trade reaching $8, earning more than 25X your money on the trade.
- On 2-16-12 in the last hour of trading I highlighted to clients an unusual buy of 5,000 General Mills (GIS) $0.20 and also on the Daily Freebies, noting it looked like an interesting lotto ticket trade with just one day until expiration
Result: On 2-17-12 General Mills (GIS) cut earnings guidance and shares dropped, the puts jumping to $1.80, a trade that profited 9X the investment.
- On 2-3-12 I highlighted Dry Dhips (DRYS) March $2.50 calls being bought late in the day at $0.16.
Result: DRYS shares rallied the next few days and the calls jumped to $0.80, +400%
- On 1-23-12 I highlighted unusual call buying in Zynga (ZNGA) with “Zynga (ZNGA) March $12 call buying was the earliest action with 1,700 bought and now more than 5,150 with IV30 up 11.5% today and call volume 5X daily with 65% on the offer, very far OTM lotto tickets with shares at $8.90. The recent IPO has struggled but a move past $9.50 and it could see a big move higher. The $6.36B Co. is a big time growth play in the online gaming market, and although trading 7.7X earnings and 8.1X book it does trade cheap at 13.9X cash flow, and any sign of better than expected earnings and shares would rally, also remains a potential acquisition target for EA. Zynga is seeking partner for an Online Gambling initiative which could be a big growth driver. Morgan Stanley owns 16% of the Company stock and was a big buyer at the $14 private value.”
Result: Zynga Shares Rocketed the Next 2 Weeks on the Facebook IPO and the Calls Pricing $2, Up 550%+
- On 1-30-12 I noticed a surge in Exxon (XOM puts into earnings, saying “Exxon (XOM) shares are 1.1% lower into earnings tomorrow morning and shares are below its 20 day EMA today for the first time since late November when the rally started. On the day 40,000 puts and 23,425 calls trading with $1.7M in put premium purchased and a -803K Net Delta, very bearish bias in the options flow into results. A notable buy of 5,000 February $85 weekly puts at the $1.03 offer sticks out, while February $85/$80 put spread bought 500X at $1.47 also. More than 19,500 of these weekly $85 puts trading today which is incredible. Exxon is likely to face similar earnings shortfalls that Chevron saw, weakness in the refining segments. Exxon trades 10.3X earnings, 0.88X sales and 2.64X book with a 2.19% yield, so downside fairly limited, but potential to move back to $80 in the short term. Howard Weil downgraded to Perform on 1-17-12. Exxon announced a $3.9B sale of its Japan refining unit today, a signal that refining is an issue.”
Result: We picked up the XOM Puts at $0.96 into Earnings and Shares Fell the Next 2 Days, a Quick Move to $1.50 in the Puts
- On September 21, 2011 I saw large buyers in Manitowoc (MTW) calls, noting “Manitowoc (MTW) opening buyer of 3,500 March 2012 $10 calls at $1 offer, and then followed up with bigger buys as 15,000 now trading. Shares are climbing back after making new year lows, and trading 10X daily call volume now, as 15,000 December $12 calls sold to close, traders looking longer term and rolling out to March $10 with a higher Delta. We have seen a ton of notable call buying in MTW, a name that smells of M&A interest at 7.37X earnings, 0.33X sales and 2.18X book with a $1.1B market cap, and a leader in the Crane market.”
Result: The Action Nearly Marked the Bottom in Shares and with Patience the Calls are Now Worth $5, +400% as of 2-1-12
- On January 20th, 2012 I highlighted large buying in Marathon Petro (MPC) Calls with “Marathon Petro (MPC) trading 11,097 calls which is 7X average after Jana Partners took a 5.5% stake in the Company, and late day February IV is jumping with big blocks of February $37.50 calls bought to open, more than 5,000 of those trading and IV30 jumping 17.6%. Since the spin-off from Marathon shares have not performed well, but up big this past week on volume as refiners benefit with Crude back under $100. The $12.8B Co. is a clear value at 4.77X trailing earnings, 0.13 PEG, 0.17X sales and 3.7X cash flow, but sees a 25% fall in EPS in 2012 and the whole group has been cutting guidance. Barclay’s brought down its target to $43 last week, while Deutsche Bank is at a Buy and $50 target. Jana is an activist investor and a history of pressing companies to break-up, and could fight for separation within the refining business.”
Result: On February 1st, MPC Announced the Break-Up I Predicted and the Calls Jumped More than 300%
- On January 2nd, I noted unusually bullish call buying in Agilent (A) with “Agilent (A) seeing call volume 1.5X daily with 70% offer side, the February $40 calls bought 2,000X today at $1.44, over $215,000 in call premium purchased. Agilent has put in a strong base, and remains in a multi-year uptrend, now breaking its 50 week EMA and looking to move higher with a bullish ADX cross on the weekly. Agilent is a $13.76B maker of medical and scientific instruments that trades 11.3X earnings, 0.96 PEG, 3.2X book and 12.83X cash flow, a fairly good value name seeing 10% EPS growth for FY12. Longbow reiterated a Buy today and raised the target to $50 from $44. The consolidation of shares this week looks healthy to the trend-up.”
Result: By February 1st, the Agilent (A) Calls were +200%
- On January 19th I noted bullish action in Covidien (COV) with “Covidien (COV) shares are higher today and broke a key descending trend line after a base was put in near $42, so measuring to $54 from here and earnings set for 1/26/12. The Company announced an expanded recall this morning, but bulls seem to like the name with 6,160 calls trading, 66% on the offer and over $340,000 in call premium purchased, also looking ahead to the planned spin-off the Company recently announced. The February $45 puts did see buyers last week for 2,400+ contracts, but July $50 calls today bought 4,715X at $1.65. Covidien trades at 10X earnings, 1.93X sales and 2.27X book with a 1.95% yield, cheap on valuation and a $57 target and overweight rating at Barclay’s. The planned spin-off of it’s Pharma unit is expected to create shareholder value.”
Result: The $1.65 Calls saw a lot more attention the next few days, currently 16,413 in OI and at $3.50, more than a 100% Gain in a Week
- On January 13th, 2012 I highlighted early morning action in Agrium (AGU): “Agrium (AGU) was green yesterday despite the crop report that hit the other fertilizer names and today IV is pushing higher as 5,800 January $77.50 calls trade against OI of 2,333, far OTM and remember that February $80 calls were bought more than 4,000X recently. Shares formed a rounded bottom and starting to make a run with strong volume supporting the move. The $11.7B Co. trades 8X earnings, 0.8X sales and 1.9X book and with these names expected to be acquired by global mining Co’s, Agrium is a name seeing the bullish OTM positioning lately, the type of action seen before buyouts often.”
Result: The calls jumped 300% by days end, showing that these trades are also often successful in short timeframes
- On November 28th, 2011 with shares at $8.50, I noted bullish action in Cobalt Energy (CIE): “Cobalt International Energy (CIE) with an opening buyer of 2,000 April $12.50 calls on the $1.25 offer at the PHLX, paying the offer on a $0.40 wide bid-ask, aggressive bull. Shares have resistance at the 200 day EMA just above $11 where shares failed recently, and an inverse head and shoulders reversal pattern has formed. The $3.5B Gulf of Mexico and West Africa Oil Exploration Co. trades 1.63X book value and 3.66X cash value, expected to lose $0.38/Share next year. There is also 4,000 January $12.50 calls in Open Interest. JP Morgan lowered its price target on 11/2, but the Cameia #1 drilling results due in December offshore Angola, a potential positive catalyst.”
Result: By January CIE Shares Traded Above $18.50 on Strong Well Results, the Calls Gained 480%
- On September 26th 2011 I highlighted a large bullish trade in El Pase (EP): “El Paso (EP) with a 10,000 contract November $18/$15 bull risk reversal for $0.29 to open. El Paso shares are trading at its lower acceleration band, oversold and due for a bounce, also near key support that has held 3 times in 2011. The $13.2B Natural Gas Co. trades 13.5X earnings, 3X sales and 2.44X book, and has a ton of open interest in longer term options, potentially seen as an acquisition target. Third Point, who has been active lately, raised its stake in EP during Q2. Traders may be positioning ahead of its planned E&P spin-off.”
Result: In October El Paso (EP) was Acquired in a Large Takeover, a $6.71 million Gain on the Trade
- On November 22, 2011, well ahead of any of the other providers I noted action in Inhibitex (INHX) “Inhibitex (INHX), featured on Bloomberg’s Real M&A this morning following the Gilead (GILD) acquisition of Pharmasset (VRUS for a big premium, is trading 10,244 calls today, 50X daily average with one large spread accounting for most of the action. A trader sold 2,810 January $12.50 calls at $1.20 to buy 5,610 May 2012 $12.50 calls at $2.80 in the bullish ratio calendar spread. Shares are nearing the $12.76 all time highs from 2004, gaining 200% the last few weeks. The spread appears tied to a large block of 315,000 shares of stock that traded near the same time. The $830M Biotech had its price target raised to $15 at Deutsche Bank on 11-7. The key catalyst will be 7 day data for on-going 100mg + ribavirn study and Phase 2 genotype 2/3 4 week data expected in Q1 2012. INHX is becoming a player in the lucrative Hepatitis C market and its drug is oral and has shown no nasty side effects.”
Result: On January 7th, 2012 INHX was acquired by Bristol Myers at $26/Share, a 150%+ Move, a $5.6 million Gain
- On January 5th, 2012, at 10am I noted “Ciena (CIEN) IV jumping as more than 2,000 January $12.50 calls are bought, already a lot of Open Interest, and shares trying to breakout after flagging on its 50 day EMA, an optical name that could lift after Oclaro (OCLR) provided shockingly good guidance in a group that has been looking for good news. The $1.19B Co. trades 0.68X sales, 13X earnings and 2.2X cash value, potentially attractive as a takeover target. Deutsche Bank reiterated a Buy in December, $16 target. Shares have near term upside to channel top at $14.50.”
Result: We bought these calls at $0.48 and Sold an Hour Later at $0.60, +25%. Note, the Calls Reached $0.96 by the Close, +100%, and were pricing $1.80 by 1/11/12
- On January 4th I highlighted call activity in Netflix (NFLX) and Tweeted the Info, noting to clients “Netflix (NFLX) is near the lead with over $2.7M in call premium bought today and a large positive Net Delta in trading, action really heating up after a block of more than 6,100 March $100 calls was bought on the PHLX at $2.65 offer, and more than 8,000 of those contracts trading. Shares traded in a narrow range for weeks and based around $65/$70 area, and we could see some expansion here with resistance at the 50 day EMA well above at $85, and a gap from $90 to $115. The name has been noted today as a Company Yahoo (YHOO) could look to buy with new Mgmt., and I would believe it could be a bidding war with Google and Amazon also likely interested. Although subscriber rates took a hit, Netflix is still a leading brand presence for video streaming, and now trades 16.4X trailing earnings, 0.8 PEG, and 1.37X sales with jsut a $4B market cap. The Company had a PR this morning announcing 2B hours of Movies/TV Shows watched in Q4. The options action along with the technical breakout, and potential for M&A, gives possibility to Netflix getting it’s swagger back.”
Result: NFLX Rallied Sharply and 2 Days Later on 1/6 the March 100 Calls Priced as High as $6.70, Nearly Tripling
- On January 3rd, 2012 I wrote “LSI Corp (LSI) call volume running at 8X daily average with 4,300 of the January $6 calls bought to open at the $0.30 offer in a multi-exchange sweep. Barclay’s raised shares to Overweight this morning. LSI shares are breaking out of a triangle and past longer term trend resistance. The $3.35B Semi trades 11.9X earnings, 1.7X sales and 14.5X cash flow with 13.65% FY12 EPS growth seen. As disk drive capacity returns following the Thai floods, LSI could be set to benefit, and bulls are expecting a strong 3 weeks ahead for shares.”
Result: By January 5th, two days later, shares were trading up to $6.70 from $6 on multiple upgrades, calls at $0.75, +150%
- On December 28th, I noted late in the day “Silver Standard Resources (SSRI) a late day surge with 2,500 February $12 calls bought to open on the $1.65 offer in a multi-exchange sweep. Silver (SLV) is off 5.8% today and broke technical support, however SSRI has held up down just 0.6% and holding prior lows. The $1B Silver miner trades 11.11X forward earnings, 1.05X book and 2.65X cash value, started Accumulate at Global Hunter on 12-16 with a $23 target.”
Result: Shares Bottomed that Day and Jumped from $12.40 to $15 in 5 Days, Calls Moving to $3.30, +100%
- On December 14th, I wrote “Acme Packet (APKT) is trading 6,450 puts on the day, 2X daily with $1.9M in put premium purchased, mostly from a block of 3,500 February $32.50 puts bought on the $4.30 offer while the $37.50 puts also with some buyers at $7.30 offers. Shares continue to fail at its 50 day EMA on bounced and now struggling at the 20 day EMA, potential for a break of $30 and for shares to head to $25. Shares were higher initially this morning on a Morgan Keegan upgrade to Outperform with a $45 target, while Mizuho cut its target to $28 on 12-1. Acme Packet remains rich on valuation at 47.5X earnings, 7.7X sales and 52X cash flow, and a tough market for growth stocks.”
Result: APKT Cut Earnings Guidance on 1/3/12 and Shares Crashed to New Lows, Puts Trading to $7.50 and the Trader Actually Closed the Puts and Bought 14,000 February $25 Puts
- On December 9th, I highlighted a trade to clients “Monsanto (MON) traded large blocks of calls in the January contracts yesterday and today with the Open Interest changes it is easier to see the strategy, an adjustment trade. The Trade sold to close 12,000 January 2012 $72.5/$82.5 call spreads and opened the January $70/$82.5 call ratio spread for 12,000X20,000 contracts, paying $2.18 for the $70’s and selling the $82.50’s at $0.27. Monsanto shares have pulled back to support despite a recent positive earnings outlook for 2012, and the Company has been subject to some negative press regarding its lead product being ineffective against bugs. Shares have major support with the 200 day EMA now around $69 and $76 was a major top, while $63 is a major bottom of a long channel, so now back near the mid-point. Shares need to clear $73 to break the short term trend down, and a move past $76 would target $85. Monsanto shares trade 17.34X forward earnings, 2 PEG, 3.17X sales and 22.1X cash flow, fairly expensive, and offering just a 1.72% dividend yield. UBS started shares Neutral on 11-2 with a $72 target, while Citi reiterated a Buy and $81 target on 11-11.”
Result: MON Reported Strong Results on 1/5 and Shares Hit $77.50 on 1/6. The Ratio Call Spread Gained Big!
- On December 7th, I wrote ” Joy Global (JOY) puts trading above daily average and $275,000 in put premium purchased this morning with December $87.50 puts seeing a few large buys with 1,800 trading. Earnings were confirmed today for December expiration on the 14th, and front month volatility is rising today. Shares are 1.7% lower today, and apparently changed its ticker from JOYG to JOY. Shares have gained in 6 of the last 7 earnings reports. JOY shares are struggling at $92.50 resistance with a large bull flag set-up, some bearish divergence on RSI and MACD with the October highs. The $9.4B Farm & Construction Machinery Co. should report solid results after CAT and DE were strong, and at 12.5X earnings, 0.99 PEG, and 2.3X sales shares are still attractive on valuation. Morgan Stanley started shares Equal Weight on 11-2. Shares were subject of takeover chatter on 11/23.
Result: JOY shares plummeted under $75 on earnings and the $87.50 puts gained to above $13, only costing $2.80 on the day I highlighted the action.
- On November 25th I wrote that Arcelor Mittal (MT) traded 9,060 calls which is 2X daily and 85% on the offer with more than 7,000 in the December $15 calls, a large block of more than 3,000 of those calls bought to open at $1.45 started the action. Arcelor shares are back to the October lows and Steel stocks generally bottom in Q4 so traders playing for the double bottom. The $24B Steel Co. trades 5.96X earnings, 0.5 PEG, 0.26X sales and 0.4X book with a 4.86% dividend yield, extremely cheap and attractive on valuation. Dahlman Rose raised to Buy in October with a $34 price target, more than double from current price.
Result: Arcelor (MT) Shares Climbed to $19 from $15 in the Next 5 Days, the Calls at $4.15, a large gain.
- Idenix Pharma (IDIX) was highlighted on October 17th with shares at $5.30 noting that 7,500 November $5 puts were sold to open, and 7,500 January $7.50 calls were bought to open in a very bullish spread. The trade came after Anadys (ANDS) was acquired for a 270% premium, putting other Hepatitis C names in the spotlight for acquisitions. The spread resulted in 160X daily options volume and traded for a net credit. I added that ” Shares have since experiences a few sharp sell-offs but have recovered each time, and now looking to spring higher after breaking a short term downtrend with $7 long term resistance. The $487.5M Biotech has 7.44% of its float short, and trades with ugly fundamentals, expected to lose $0.57 per share next year. Idenix was reiterated a Buy with a $9 target at BofA in August, and is one of the main Hepatitis C fighting Biotech’s, in a league with Vertex (VRTX) and Pharmasset (VRUS). Idenix is developing a “nucleotide” drug against Hop C known as IDX184, currently on FDA hold due to liver toxicity during a study, but believed to be a result of IDX320. Phase2b studies underway and should be presented in Q4, and if successful will likely lift the FDA hold and could see a major pop in shares to be considered more fairly valued to peers VRUS and VRTX.”
Result: IDIX hit $14.40 by January 13th, the Spread Valued at $7,a Huge Gain
- 20 Year Treasury (TLT) was highlighted on the morning of September 21st when more than 5,000 December $115 calls were bought at $4.30 to open within the first 5 minutes of trade, and noted that it was a day when the FOMC was scheduled to make an announcement, so Treasuries were expected to make a big move when the Fed’s new plans were detailed in the release. The TLT was trading around $115 before the release and then jumped to above $118 that day and to $123 the following day.
Result: TLT Calls Gained to $10.60 from $4.30, a 145% Gain
- On September 16th, 2011 with MDVN at $19.70 I noted ” Medivation (MDVN) big buyer of 200,000 shares of stock that sells 2,000 December $30 calls at $1.55 and buys the $19/$13 put spread 2,000X at $3, protecting the stock position and willing to let shares go at a $30 price tag. Shares are breaking out as I write intraday and on the daily chart, traders looking to October where IV is at 227% as results from Phase 3 of MDVN301, its prostate cancer drug, are expected shortly. Morgan Joseph started shares with a Buy and $30 target this month, also one of the main players in Alzheimer’s, although a recent set-back, shares have recovered from $9.”
Result: MDVN jumped to $45 in November on Drug Results, trader to have shares called away for big gain
- First Solar (FSLR) December $100 puts were highlighted on August 3rd with 3,000 bought at $7.85 to open, a $2.355M position the day ahead of earnings. The chart also was bearish and the fundamental picture becoming bleak with uncertainty regarding subsidies as the Eurozone governments faced a debt crisis. Shares of First Solar traded lower on earnings, and then continued lower for weeks.
Result: By late September, the puts were trading as high as $45, a 470% gain.
- Metals (XME) December $50 puts were highlighted on September 19th when a block of 8,900 was bought at the $3.35 offer on the PHLX to open, a $2.937M position. The trade happended after the market failed at key resistance, and also notable put buying in other industry ETFs, noting that Metals are considered a risky assets and high Beta, so if looking for short exposure a good place to start if you are predicting a market sell-off. Within days the market sold off sharply and Metals traded more than 10% lower in a week. The XME was also nearing an uptrend break, so noted to clients to set an alert for a break of $54, which triggered later that day.
Result: By September 23rd the XME puts traded above $7, more than a 100% move in a few days of trading.