Today’s tickers: HGSI, MSTR, INTC, FXI, EFA, AA, AVP, RDC, PLL, FSLR, MOT & AKAM
HGSI - Human Genome Sciences, Inc. – Shares of the biopharmaceutical company made a miraculous recovery since yesterday’s slaughter by exploding 13.25% higher during the session to $20.40. Traders populated various contracts with bullish plays after HGSI was raised to ‘overweight’ from ‘neutral’ with a 12-month target share price of $25.00 at JPMorgan. Heavy call volume in the November contract was likely driven by traders anticipating results of Phase 3 trials employed to evaluate the efficacy of HGSI’s potential drug treatment for lupus, Benlysta. Trading at the November 20/25/30 strike prices mimicked the butterfly spread strategy, and suggests perhaps that traders expect shares to rise to $25.00 by expiration. Investors bought at least 3,500 calls at the November 20 strike for 1.88 apiece as well as purchased 3,500 calls at the November 30 strike for 60 cents each. These contracts effectively mimic the wings of the spread while the 9,000 calls sold at the central November 25 strike perhaps represent the body of the spread. Call spreads were initiated in both the December and January contracts. The December transaction, for example, involved the purchase of 1,000 calls at the December 25 strike for 2.60 each, spread against the sale of 1,000 calls at the higher December 30 strike for 1.00 apiece. The net cost of the trade amounts to 1.60 per contract. Thus, the investor may accumulate maximum potential profits of 3.40 per contract if shares of HGSI rally up to $30.00 by expiration day in December.
MSTR - Microstrategy, Inc. – The software company appeared on our ‘hot by options volume’ market scanner this afternoon due to bullish options activity. Investors initiated optimistic plays on the stock despite the 1% decline in shares to $73.03. Profit-taking action appeared in the January 2010 contract while fresh positions were taken in the April 2010 contract. It looks like one investor originally purchased 3,600 calls at the now in-the-money January 70 strike for an average premium of between 3.00 to 3.50 per contract back on July 31, 2009. Today the trader sold the calls for a whopping 7.20 apiece. Net profits enjoyed on the closing sale amount to a minimum of 3.70 up to 4.20 each. Thus, total potential profits earned by the trader are anywhere from $1,332,000 to $1,512,000. In the April contract a bullish risk reversal suggests investors expect…
