Best Buy Options Surge Higher

Best Buy Co., Inc. (BBY) shares may have dropped Monday, but options painted a more bullish picture. Some 12,305 call options traded hands, which is more than 3x the average daily volume of 4,000 contracts. The majority of the action was seen on the September $47.50 call options, which are trading at $0.70 per conract. The move means at least some traders are betting on a 9% move higher during the next half of a month until the September expiration.

Electronics retailers like Best Buy have struggled in recent months amid a slowdown in U.S. consumer spending. Shares in the retailer have fallen more than 7% since the beginning of 2008, but began to recover ground last quarter when it beat expectations. Best Buy also announced a long-term plan to double sales between now and 2013. The company also has plans to open up its second flagship store in China wwhile launching also launching airport gadget vending machines.

Investors are also beginning to see the light at the end of the tunnel. Bank of America Securities analysts upgraded the stock last month, saying market share gains will offset weak sales throughout the industry. David Strasser, who covers the company, raised his rating on Best Buy from “Neutral” to “Buy” while increasing his price target from $41 to $46 per share. The analyst noted that the retailer gained market share in several key markets, including flat panel TVs, videogames, and notebooks during the second quarter.

Best Buy is a specialty retailer of consumer electronics, home office products, entertainment software, appliances and related services. The company operates retail stores and web sites under grand names Best Buy, Five Star, Future Shop, Geek Squad, Magnolia Audio Video, Pacific Sales Kitchen and Bath, and Speakeasy. It operates both domestically in the United States and internationally in Canada and China.

TIE Options Predict Move Higher

Titanium Metals Corporation (TIE) shares closed sharply higher Monday, but it was the options market that saw the action. Call options on the titanium producer saw some 80,000 contracts trade hands, which is more than 13x the average trading volume of 6,188 contracts. Traders bought up more than 63,000 October $12.50 calls, which are now trading at $1.65 per contract. The move suggests that traders believe TIE shares will surpass $14.15 per share - or 9.5% - during the next month and a half.

The bet on Titanium Metals bet is considered somewhat bullish given that the stock is down more than 50% in 2008. During its most recent quarter, the firm reported a drop in profits on lower sales, hurt by declining prices, decreased sales volumes for melted products and increased cost related to raw materials. To make matters worse, many of the company’s long-term contracts keeping raw material costs down will expire in the future and may reduce earnings.

Titanium Metals’ low price and multiple has many speculating that a buyout may be in the cards. Monday’s $10.3 million call option added to the fire and prompted trading in the underlying shares to jump in both price and volume. More than 8.6 million shares traded hands, compared to an average daily volume of 3.6 million shares, while the price jumped some 6% throughout the day. Notably, the buy in the October expiration suggests that a deal - if it exists - may not take place in September.

Titanium Metals is a producer of titanium melted and mill products. The company has titanium production facilities in both the United States and Europe that are vertically integrated. Its products include titanium sponge, melted products, and mill products. Its products are used in a variety of places, but most notably in airplanes. Recently, prices for the commodity have begun to slow amid reduced demand and increased supply.

CSUN Options Surge Ahead of Earnings

China Sunergy (CSUN) shares dropped sharply Thursday despite bullish options activity. The Chinese solar manufacturer saw more than 6,000 call options change hands, which is more than 7x its average daily volume of 877 contracts. The majority of the trading took place at the September $10 and $12.50 calls, which suggests that traders are very bullish on the stock over the next 29 days. The move follows similar sentiment ealier this week with about 53 calls for every put purchased on the stock over the past 10 days.

The huge increase in options activity comes ahead of the firm’s earnings announcement on Friday. China Sunergy has beat Wall Street estimates during the past two quarters and many options traders are betting that they will this quarter as well. Many of the company’s peers - like Suntech Power Holdings (STP) - have also announced positive earnings. There has been particular interest in the earnings outlooks for solar stocks, which have proven to be rather bullish for many in the sector.

Earlier this year, China Sunergy reported a 7.8% increase in revenues from the previous quarter and reaffirmed its 2008 profit forecast for the year. Revenues were up 7.8%, which was better than expected given a three-week interruption to their operations and higher wafer costs during the quarter that pressured margins. The improved financial performance was thanks in large part to higher ASP achieved by successfully ramping high efficiency cell production levels and improvements to operations.

China Sunergy is engaged in designing, developing, manufacturing and selling solar cells. It manufactures solar cells from silicon wafers utilizing crystalline silicon cell technology to convert sunlight directly into electricity through a process known as the photovoltaic effect. It sells its solar cell products to Chinese and overseas module manufacturers and system integraters, who assemble solar cells into solar modules and solar power systems for use in various markets.

NBTY Straddle Raises Questions

NBTY Inc. (NTY) shares moved marginally higher on nearly double their average daily volume after some unusual activity in the option’s market. Traders established a $130,000 straddle position Thursday between the October $30 and $40 strike prices. The trade indicates that at least one options trader believes that there will be significant volatility over the next 57 days. The straddle will be in-the-money if NBTY shares drop below $29.50 or above $40.80.

During the third-quarter, NBTY reported lower profits that beat street expectations. The nutritional supplements manufacturer’s results were hurt by lower gross margins and higher advertising costs. Margins were likely hurt by rising raw material costs thanks to the lack of ability to raise product prices in the short-term. Meanwhile, higher advertising costs were likely necessary in order to maintain sales levels during the troubled times.

There is no new news or upcoming events that suggest any kind of substantial volatility in the near-term. third quarter earnings were reported in July, which suggests that fourth-quarter earnings won’t comeuntil later this year. Meanwhile, there are no new events listed on the company’s website that would suggest any upcoming volatility. As a result, many investors are wondering why the options trader set up the position in the first place.

NBTY is a vertically integrated manufacturer, marketer and retailer of a broad line of nutritional supplements in the United States and around the world. The company markets approximately 22,000 products under numerous brands, including Nature’s Bounty, Vitamin World, Puritan’s Pride, Holland & Barrett, Rexall, Osteo-Bi-Flex, Flex-a-min, Knox, Sundown, MET-Rx, WORLDWIDE Sport Nutrition, American Health, DeTuinen, Le Naturiste, SISU, Solgar and Ester-C.

Medtronic Options Surge Higher

Medtronic, Inc. (MDT) shares moved higher Thursday after reporting earnings earlier this week and approving a cash dividend. Options on the stock also surged higher with some 13,071 contracts changing hands, which is more than five times the average daily volume of 2,469 contracts. Short-term traders picked up the September $55 and $57 calls, which is reflects a positive sentiment on the stock over the next 29 days. Many long-term traders also picked up the January ‘09 $50 in-the-money LEAPS, which saw some 2,035 contracts trade hands.

Last quarter, Medtronic saw its revenues rise 19% year-over-year thanks in large part to a lower dollar that helped spur growth overseas. New product sales also accounted for a substantial increase in revenues with the company’s spinal business rising 33% thanks to its recent acquisition of Kyphon. However, organic growth of its spinal business grew only 8% this year, which is rather weak by a historical prospective. Sales of its new drug-eluting stent Endeavor also grew to claim 19% of the U.S. market.

Investors have been most impressed with Medtronic’s new status as a cash cow. The company has increased its dividends nearly 50% while using additional cash to buy back shares. The 1.4% dividend may not seem like a lot on the surface, but it is certainly a good amount given the spectacular top-line growth. Moreover, investors can expect further improvements from a $1 billion planned reduction in cost of goods sold by 2012, which will improve its bottom-line.

Medtronic, Inc. is a global player in medical technology, alleviating pain, restoring health, and extending life for millions of people around the world. The Company operates in seven business segments: Cardiac Rhythm Disease Management (CRDM); Spinal; CardioVascular; Neuromodulation; Diabetes; Surgical Technologies, and Physio-Control. In October 2007, the Company launched the CD HORIZON LEGACY Anterior Spinal System. In July 2008, Medtronic completed the acquisition of Restore Medical, Inc.

Dell Options Higher on HPQ News

Dell (DELL) shares jumped higher Tuesday after positive news was announced by competitor Hewlett-Packard (HPQ). The technology bellwether shrugged off concerns about a potential economic slowdown and issued guidance that surpassed Wall Street estimates and sent shares 5.7 percent higher on the day. Dell shares also rallied on hopes that it would see similar increases despite an anticipated drop in corporate technology spending.

Dell and Hewlett-Packard also both saw heavy call option volume Tuesday after the news hit the market. Dell doubled its average daily volume with 21,833 contracts traded while Hewlett-Packard tripled its volume with 54,723 contracts changing hands. The October and November calls were the most popular, given the fact that Hewlett-Packard’s forecast was for the upcoming quarter. However, LEAPS and long-term options were also popular trades on the day.

Goldman Sachs may also be partially responsible for the jump in options activity. The investment firm noted that implied volatility in the technology sector remains near 3-year lows, which means that many technology options may be “on sale” if a catalyst hit the market. Goldman Sachs believes that this catalyst is the upcoming decline in corporate technology spending, which may cause a rift in the technology sector and spark greater volatility.

Technology leaders like Hewlett-Packard are expected to benefit from this tightening spending as more businesses choose the providers with greater pricing power. Meanwhile, second-rate companies could suffer with less discretionary corporate technology spending to pad their coffers. The results may be an increased implied volatility premium, which will increase the option’s premium. Holders of these options will therefore see higher prices.

Goldman Suggests Buying Tech Options

Cisco Systems (CSCO) and Hewlett-Packard (HPQ) options may be worth purchasing after contract prices fell to their cheapest levels in five years, according to Goldman Sachs Group. Implied volatility, which is one of the factors affecting the options’ premiums, are at their lowest levels since 2003 when compared to the S&P 500. Experts believe that the stronger dollar value and slower global GDP growth may provide catalysts for higher volatility at the sector level.

Experts suggest that investors look at purchasing bullish call options on large technology companies, like IBM (IBM) and Oracle (ORCL), because they are “best positioned in the current environment”. Meanwhile, analysts at Goldman recommended buying bearish put options on smaller companies whose growth may slow as corporations cut technology spending. These companies could include those like Juniper Networks (JNPR) and others.

Overall, technology spending is expected to decline this year, which means larger companies that can realize economies of scale. The primary catalyst behind this decline in spending is due to an increase in the dollar’s value, which could make exports more expensive in the future. The bet Goldman favors is that this will simply increase the volatility in the sector, which will make the option premiums rise. And this represents an opportunity for investors to profit.

Target Options Surge Higher

Target Corporation (TGT) shares may have declined Tuesday, but call options traded at double its average daily volume. The troubled retailer beat analyst expectations but nevertheless reported a 7.6 percent decline in second-quarter net income. Same-store sales - a key retail metric - also dropped for the second quarter in a row as consumers flocked to discount retailers like Wal-Mart Stores (WMT). Target also noted that they do not see any indication of meaningful near-term improvement, which sent shares lower.

Target call option trading painted a decidedly more bullish picture than management. The trading continued Wednesday with 1,268 October $60 calls trading hands, which suggests that some believe the retailer will hit $60.40 over the next 58 days. The greatest volume, however took place at the 45 January ‘09 calls, which suggests that a price of $53.40 over the next 149 days. Combined, the call options trading throughout the week suggests a bullish sentiment on the retailer.

Target also saw some activity from Pershing Square’s William Ackman, who holds a large stake in the troubled retailer. The activist investor reduced his holdings in Target by 18.27% at an average selling price of $52.40. Ackman may have taken the action to keep his stake below 10% as the company begins to repurchase shares under a stock buyback plan. The activist investor also still owns a substantial number of shares through swap agreements and long-term call options.

Target Corporation is a retailer that operates large-store general merchandise formats, including discount stores, moderate-priced promotional and tranditional department stores. They provide value to customers through multiple retail formats ranging from upscale discount and moderate-priced to full-service department stores under several names, including Target, Mervyn’s, Dayton’s, Marshall Field’s, and Hundon’s.

Petrobras Jumps on Carioca Rumors

Petroleo Brasileiro SA (PBR) shares moved higher Tuesday after traders speculated that the firm may be close to a major announcement. The rumors stemmed from unusually high call option volume, which hit 100,214 contracts before the day ended. The majority of the options trading took place at the September $55 calls, which suggests that traders believe shares will appreciate 12.7% over the next 30 days. The bullish move is especially surprising given the downward movement of crude oil.

Many investors believe that Petrobras is close to announcing more definitive findings on its Carioca field on Block BM-S-9 in the Santos Basin off the coast of Rio de Janeiro. The discovery is close to the company’s huge Tupi discovery on Block BM-S-11, which was announced in October of 2007. Given the huge findings in Tupi, many investors are bullish about the prospects of the Carioca field and any announcement could send shares dramatically higher.

Oil prices themselves have declined over the past couple of months, but prices still remain substantially higher on the year. Currently, oil futures have traded with strong support on the $112 per barrel mark. Many experts believe that any substantial dip below that point will require a new injection of bearish economic data into the marketplace. Oil prices are also expected to receive a boost on Wednesday when the Energy Information Administration is expected to report a decline in petroleum stocks.

Petroleo Brasileiro SA - Petrobras (Petrobras) is a Brazil-based holding company is engaged in the exploration, exploitation and production of oil from reservoir wells, shale and other rocks, and in the refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy related activities. Petrobras has 109 production platforms and 15 refineries. It operates 31,089 kilometers of pipelines.

Wells Fargo Puts Surge Higher

Wells Fargo & Company (WFC) shares dropped Tuesday after debate on the firm’s outlook escalated. The residential mortgage lender and consumer loan underwriter is being seen in a bearish light by many investors who believe there may be more pain before any gain. Analysts are expecting wide losses for the firm, but others are optimistic about expansion opportunities in the troubled market. Overall, Wall Street appears to be rather indecisive in its sentiment on the company.

A Wells Fargo spokesman was quick to note that Wells Fargo continues to be the only bank in the U.S. to be rated ‘AAA’, continues to grow, has a strong balance sheet, and has the strongest capital ratio in their peer group. The spokesman also said that given the company’s diversification, it continues to perform well during the current economic cycle just as it has endured through all kinds of other economic cycles during its 156-year history.

Wells Fargo options also surged in volume with the September puts being most active. However, some call activity suggesting a straddle position or some bullishness in the stock. The September $25 puts were the most active with 22,281 contracts trading hands today, suggesting a large bet on a decline over the next 30 days. Interestingly, the second largest trade was in the September $30 puts, which saw 10,177 contracts trade hands.

Wells Fargo & Company is a diversified financial services company. It provides retail, commercial and corporate banking services through banking stores located in 23 states: Alaska, Arizona, California, Colorado, Idaho, Illinois, Indiana, Iowa, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah, Washington, Wisconsin and Wyoming.

Next Page »