Cisco (CSCO) Traders Don't See Much Upside

Options traders trading Cisco Systems (NASDAQ:CSCO) don't see much upside for the stock, as the company is trading close to its 52-week low.

CSCO is up 0.01 percent on the day to $17.30, as of 2:07 PM EDT. The networking dropped to a 52-week low of $16.97 a couple of weeks ago. The shares have trended down from near $28 last April, gapping lower on each of the last four earnings reports.

Optionsmonster noted, "Leading today's options volume is the action in the January 19 calls. A trader sold 7,500 of those calls for $0.99, taking the bid price at the time. This was against open interest of 1,896 contracts, so it was a new opening position.

"Although there was action across some other call strikes, including the January 22.50 calls, this selling at the $19 strike is the largest print and appears to be done in isolation. We also don't see any trading in the underlying stock tied to this option activity."

Toyota (TM), Sony (SNE) Get Defensive Trades After Quake

Investors took defensive measures in regard to Japan-based Toyota (NYSE:TM) and Sony (NYSE:SNE), as concerns over the impact on the two companies as to possibly being shut down for an extended period of time hit the stocks.

Trade Alert said that there close to 30,000 puts and 9,068 calls traded in the MSCI Japan Index ETF (EWJ.P) on Friday, far above its average daily combined volume of 12,000 contracts.

Jon Najarian of optionMonster.com said, "Traders are primarily buying put options, perhaps as a hedge against existing long stock positions in case of a prolonged shutdown in their automotive and parts production facilities in Japan."

Option traders traded a total of 8,433 contracts in Toyota with puts outpacing calls by almost two to one, according to Trade Alert data.

Toyota closed Friday at $85.65, dropping $1.87, or 2.14 percent. Sony closed at $33.45, down $0.81, or 2.36 percent.

Exxon (XOM) As a Hedge Play

Assumptions that gas prices will probably continue to rise for some time makes it a good bet to invest in ExxonMobil (NYSE:XOM) as a "gas-pump hedge," according to Michael Schwartz, Oppenheimer & Co.'s chief options strategist.

ExxonMobil, one of America's largest gas-station operators and the world's largest energy company, with operations in 200 countries. At over $82 a share, Exxon is up about 15% this year, and could trade higher in unison with crude, which recently reached about $106 a barrel. The nationwide average price of gasoline is about $3.50 a gallon, and prices are unlikely to decline anytime soon.

Michael Schwartz is advising clients to consider a "gas-pump hedge." It entails buying Exxon's October $85 call and selling the October $95 call, which reduces the trade's price, as Exxon's bullish call options are elevated in widespread anticipation that Exxon will keep climbing. The total position cost $2.86 when the stock was at 82.16. If Exxon's stock advances to 95, investors will make a 250% return on their money. If the stock advances to 87.86, the trade breaks even.

In the past month, six analysts raised Exxon's earnings estimates, a sign of growing recognition that the stock has room to run higher. Oppenheimer recently raised Exxon's 12-to-18-month price target to 96, from 90. To be sure, Exxon's share price is also likely to benefit from continued demand for the Select Sector Energy SPDR (XLE), an exchange-traded fund composed of 41 names. Exxon is XLE's largest component, representing 17.6% of the exchange-traded fund, so trading action in XLE tends to lift Exxon's price.




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Sprint (S) Getting Bullish Option Action

Option traders continue to pour their money into Sprint (NYSE:S), believing the company still has plenty of upside to go.

"The activity is a continuation of a pattern that began on Feb. 23 when investors snapped up the May 4.50 calls for $0.20 to $0.23 and the May 5s for $0.08. The shares have been climbing since, and those calls have now appreciated by more than 100 percent and 250 percent," according to optionMONSTER.

"Today traders purchased more than 20,000 May 6 calls for $0.08 against open interest of just 3,751 contracts. The May 5s and April 5s are also seeing buying activity, though volume remains below open interest in the strike. Overall calls have outnumbered puts in the name by a bullish ratio of 7 to 1 so far today.

"The shares are up 2.77 percent to $4.83 in early afternoon trading. They got a shot in the arm on Tuesday after Reuters reported deal talk involving Deutsche Telekom, but there are other positive factors supporting the stock."

Sprint was trading at $4.84, up $0.14, or 2.98 percent, as of 1:54 PM EST.




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H&R Block (HRB), TiVo (TIVO) Attract Option Bulls

Option traders have been bullish on H&R Block (NYSE:HRB) and TiVo (NASDAQ:TIVO), betting the shares will go up in the short term.

With markets taking a breather from oil worries, options traders staged big bullish earnings bets on tax preparer H&R Block and revisited long-running legal disputes over digital video recorders with TiVo.

Bullish H&R Block contracts changed hands at the heaviest pace in three months. In an echo of the optimistic pre-earnings bets that dominated trading early this year, traders had a preference for high-risk March call options that require a big and nearly immediate jump in the stock to show a profit. H&R Block reports earnings Wednesday after the close.

"Whenever you see people buying cheap [call] options with only a few days remaining, it's extremely bullish," said TradeKing senior options analyst Brian Overby.

Tuesday's action focused on March $16 calls to buy H&R Block's stock, contracts that expire a week from Friday. The tax-preparation company's shares were up 55 cents, or 3.8%, at $15.02 at 4 p.m. on the New York Stock Exchange.

TiVo was another draw for bullish traders who, in this case, played the contrarian as more litigation news weighed on the stock.

The company said it plans a convertible debt offering, in part to fund its legal battles, saying Microsoft filed a patent-infringement lawsuit and a complaint with the U.S. International Trade Commission. The company is already in a lengthy court dispute with rivals Dish Network and EchoStar.

TiVo closed at $8.75, down $0.31, or 3.42 percent. H&R Block closed at $15.02, gaining $0.55, or 3.80 percent.




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United States Oil Fund LP (USO) Ratio Put Spread

Shares in the United States Oil Fund (NYSEArca:USO) hit new 52-week high Monday morning, but one huge options player is positioning for the price of the underlying to pull back ahead of April expiration. It appears the trader initiated a sizable ratio put spread to benefit from limited bearish movement in the fund’s shares.

The USO’s shares increased as much as 1.1% at the start of the session to secure an intraday- and two-year high of $42.79. The contrarian player purchased 12,500 puts at the April $41 strike for a premium of $1.71 each, and sold 25,000 puts at the lower April $38 strike at a premium of $0.64 apiece. Net premium paid to establish the spread amounts to $0.43 per contract.

The ratio spread positions the investor to make money should shares in the USO fall 5.2% from today’s high of $42.79 to breach the effective breakeven price of $40.57 ahead of April expiration day. Maximum potential profits of $2.57 per contract are available to the put player if the fund’s shares drop 11.2% to settle at $38.00 at expiration. The ratio of twice as many sold lower-strike puts suggests the investor foresees limited downside movement in USO shares. But, the parameters of the spread expose the trader to losses in the event that the price of the underlying fund declines 17.2% off today’s high to slip beneath the lower breakeven price of $35.43 within the time remaining to April expiration.

Shares in the USO last fell under $35.43 on February 16, 2011. Over 193,000 option contracts have changed hands on the USO as of 11:40am, with investors prefering calls over puts, trading approximately 1.5 call options on the fund for each single put option in play.

USO closed Monday at $42.37, up $0.04, or 0.09 percent.





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Health Management Associates (HMA) August Call Options

Shares in Health Management Associates (HMA) are down today, although activity in August contract call options suggests one strategist is positioning for a rally in HMA’s future.

The options player appears to have purchased a debit call spread, buying 1,300 calls at the August $11 strike for a premium of $0.75 each, and selling the same number of calls at the higher August $13 strike at a premium of $0.20 a-pop. The net cost of putting on the spread amounts to $0.55 per contract.

Thus, the bullish trader is poised to profit in the event the health care provider’s shares soar 15.4% over the existing price of $10.08 to surpass the effective breakeven point on the spread at $11.55 by August expiration day. The investor could walk away with maximum potential profits of $1.45 per contract if shares in Health Management Associates jump 29.9% to trade above $13.00 ahead of expiration.

Health Management was trading at $10.08, falling $0.07, or 0.69 percent, as of 2:32PM EST.

Lorillard (NYSE:LO) Put Option for April Contract

A three-legged spread involving April contract put options on Lorillard (NYSE:LO) seems to be the play of trader positioning for the price of the underlying stock to drop ahead of expiration.

The stock rallied as much as 5.7% one week ago to trade as high as $81.18 after the FDA said the risk of lung cancer for smokers of menthol cigarettes does not differ significantly from that of non-menthol cigarettes. But, last week’s sharp run up in LO’s shares was fairly short-lived given other portions of the FDA report that were not quite as positive for big tobacco.

One trader expecting Lorillard’s shares to fall in the near-term seems to have established a bearish butterfly spread. The investor picked up 5,000 puts at the April $75 strike for a premium of $4.40 each, sold 10,000 puts at the April $65 strike for a premium of $1.50 apiece, and purchased 5,000 puts at the April $55 strike for a premium of $0.35 a-pop.

Net premium paid to initiate the put ‘fly amounts to $1.75 per contract. The trader profits if LO’s shares decline 6.1% from the current price of $78.00 to breach the effective breakeven point at $73.25 by April expiration. Maximum potential profits of $8.25 per contract pad the investor’s wallet in the event that shares plummet 16.7% to settle at $65.00 at expiration. Options implied volatility on the cigarette-stock is up 3.4% at 54.92% just after 1:00pm in New York.

Lorillard was trading at $77.73, down $0.01, or 0.01 percent, as of 2:29 PM EST.




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Buy Squibb (BMY) Options Says Goldman (GS)

Saying the approval for a melanoma treatment may push the share price of Bristol-Myers Squibb Co. (NYSE:BMY) up, Goldman Sachs (NYSE:GS) said it's time to buy the company.

Goldman equity derivatives strategist John Marshall said, “Bristol-Myers remains the most (in fact, only) compelling new product story in the pharma sector, with significant room for consensus upside earnings-per-share revisions. Given our expectation for higher volatility than normal over the next month, we believe options prices are attractive.”

Marshall recommends traders to acquire April $26 calls because 30-day implied volatility, the key gauge of option prices, is now low and below three-month implied volatility.

If its ipilimumab treatment for melanoma is approved in March, it would be the first treatment approved melanoma in over a decade. Estimates are it would drive up to $1 billion in sales within five years.

Assuming they get approved, calls would more than double if the stock were to increase by $1.50 by the end of March, according to Marshall.

Target (TGT), Staples (SPLS) Call Options Rise

Target Corp. (NYSE:TGT) and Staples Inc. (NASDAQ:SPLS) have been the recipients of a growing amount of bullish call options, as traders are betting the retailers will come out of their duldrums by the fall season.

Steve Claussen, chief investment strategist at OptionsHouse LLC., said, "The trade is definitely super bullish. He hits a home run if the calls are at the money in October."

Longer-term options bulls also staked out Framingham, Mass.-based office-supply company Staples for a similar rebound. Volume in Staples options reached the highest level in two years as traders sought out bullish calls and sold bearish puts that convey the right to sell stock.

Both companies' shares have sagged of late. Staples, which missed fiscal fourth-quarter estimates Monday, is down more than 10% in 2011; Target shares have lost 14% this year.

Staples closed Friday at $20.43, down $0.62, or 2.95 percent. Target closed at $51.65, down $0.43, or 0.83 percent.




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Pfizer (PFE) Call Spreads and Playing the Calendar

Chris McKhann of OptionMonster A huge call spread dominates today's option trading in Pfizer (NYSE:PFE), which pushed to a new 52-week morning trading, and continues to rise as the trading session goes on.

PFE is up 1.93 percent on the day to $19.57, as of 12:22 PM EST, continuing its run higher since hitting $14 in July. The current level represents a resistance area that has been tested three times since the middle of 2008.

We already see 67,000 options trade in the pharmaceutical company this morning, with calls outpacing puts by 9 to 1. Most of this volume is in a call calendar spread.

A trader bought 21,000 May 21 calls for $0.23 and sold 21,000 April 21 calls for $0.09. The volume at both strikes was more than four times the previous open interest.




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Option Traders Pounce on Weatherford (WFT)

Weatherford (NYSE:WFT) has attracted the interest of options traders, but not in the way that was expected, as they shrugged of the $500 million accounting error and bought up call options on the company.

The feeling is it was a one-time error the company was involved in, and expectations are it'll bounce back when the market sorts that out.

William Lefkowitz, options strategist for vFinance Investments, said, "You're never really sure how serious a tax-accounting problem is. But if it's a one-time mistake and they clean it up, all of a sudden the stock could rebound. That's why people would buy the calls."

Over 121,000 calls were acquired on Weatherford's stock, in contrast to the 53,000 put purchased, according to data from Trade Alert.

The Wall Street Journal noted, "One of the biggest moves was a strategy that traders have dubbed a "call stupid" or 'stupid spread.'

"A 'call stupid' is the purchase of two batches of bullish options to make a doubly optimistic bet. In most other types of call spreads, traders buy one batch of options and sell another to cut down on the cost.

"The traders in this case bought long-dated January $22.50 and $25 Weatherford calls in a play for shares to gain substantially by the beginning of 2012, according to a report by Pipeline Trading Systems LLC."

Weatherford International closed at $21.14, falling $2.38, or 10.12 percent.

Silver Standard Resources (SSRI) Options Activity Soaring Before Earnings Report

With expectations high across the silver sector, options activity and the share price of Silver Standard Resources (NASDAQ:SSRI) before its earnings report Wednesday morning.

Traders acquired close to 5,400 March 30 calls for $0.25 to $0.30 and 1,400 March 28s for $0.65 to $0.80 Monday, according to OptionMonster's real-time tracking systems.

While the activity in the stock slowed down on Tuesday, it was about six times the 3-month average on Monday.

With one of the mines of Silver Standard about to begin production, it appears traders are employing front-month options to play a move.

Silver Standard Resources was trading at $28.07, gaining $0.94, or 3.43 percent, as of 1:58 PM EST.

Juniper Networks (NYSE:JNPR) Benefits from Cisco's (NASDAQ:CSCO) Plunge

Options traders were scrambling in a variety of strategies as they attempted to figure out the best way to play Cisco (NASDAQ:CSCO) after their dismal quarterly results.

But that isn't the case with Juniper Networks (NYSE:JNPR), where their was very little ambiguity, as traders were bullish on the stock, with option volume skyrocketing over seven times the daily average.

The reasoning is the performance of Cisco revealed Juniper is in fact gaining share in the high-end network-switching market. That was also reflected in their earnings report in January.

Traders most bullish on Juniper zeroed in on $45 calls which would be "in the money" if the share price continues to go up into April.

The last time Juniper had this much option volume was in July 2009.

Juniper closed Thursday at $43.40, gaining $3.07, or 7.61 percent. Cisco closed at $18.92, falling $3.12, or 14.16 percent.

EMC (NYSE:EMC) Still Attracting Bulls, Calls Rising

EMC's (NYSE:EMC) consistent climb continues, and bulls believe there is still a lot of juice left in the stock, buying up calls.

Today, according to optionMONSTER, close to 30,000 July 29 calls were purchased for $0.83, while at the same time an equal number of April 24 calls were sold at $2.86.

With volume below interest for the April contracts, it appears a long position was rolled from one strike to the other.

Option volume on EMC is about three times usual, with 96 percent of activity being calls.

EMC was trading at $27.07, down $0.01, or 0.04 percent, as of 11:56 AM EST.

Options Traders Looking for Big Anadarko (NYSE:APC) Move

If you gauge things by options traders, than Anadarko (NYSE:APC) could be ready to make a big move after their presentation at the Credit Suisse Energy Conference on Tuesday.

Options activity on Anadarko soared Friday, with volume exceeding the daily average by over double. The bulk of the interest was in contracts set to expire on February 18.

According to OptionMonster's tracking systems, the February 80 calls traded over 8,000 times, earlier in the session surpassing $2, while pulling back later in the day closer to $1.80.

February 85s and February 90s also attracted interest, with calls out numbering puts by over a five to one margin.

Anadarko was trading at $78.71, up $0.39, or 0.50 percent, as of 12:19 PM EST.

Minefinders (AMEX:MFN) Gets Big Call Option Action

After a big day Thursday, Minefinders (AMEX:MFN), after the release of stronger-than-expected production numbers, received a lot of option action in general, especially calls, as the share price of the company rocketed up by over 6 percent on the day.

Of particular note were May 13 calls, which, according to OptionMonster's real-time tracking systems, traded in a buying range from $0.25 to $0.40.

Approximately 4,700 of the calls traded against open interest of only 908 contracts at that strike, according to OptionMonster.

Overall, the number of calls were 15 to 1 over puts. Option volume on Minefinders was about 8 times above normal activity.

MineFinders was trading at $10.59, down $0.04, or 0.38 percent, as of 1:57 PM EST.

Google (NASDAQ:GOOG) Could Move Up 5 Percent Says Options Traders

With expectations Google (NASDAQ:GOOG) was going to again exceed expectations for their latest quarter, option traders weighed in on it, saying they think Google will increase by over 5 percent after earnings were reported. They said this before the report.

Those number appear achievable, as in after hours trading, at about 5:00 PM EST, Google share had already risen over $15, almost a 2.5 percent gain less than an hour after the report concluded.

According optionhouse.com chief investment strategist Steve Claussen, that's less than past quarters. He noted, "Compared to the 11.2 percent move in the stock after earnings in the previous session and a 7 percent move prior to that, the expected move this time is a bit subdued."

So far the most active options on Google are the January $630 and $650 calls, which probably point to bets made for the short term, specifically for today, as they expire at close of trading.

Google easily beat earnings estimates, and revenue was up as well. They closed Thursday at $626.77, down $4.98, or 0.79 percent.

General Electric (NYSE:GE) Attracting Option Trader Interest Before Earnings Report

General Electric (NYSE:GE) will release their earnings report Friday morning, and option traders have been have been buying up April calls in response.

While the April calls were diverse, it appears the 21st was of particular interest, where over 13,000 calls changed hands in a solid buying pattern for $0.12 to $0.15 against open interest of 3,732 contracts.

For those to generate a profit for the buyers, General Electric's share price would have to increase by over 14 percent by the middle of April.

That's not an easy task since GE hasn't seen a $21 strike price since the latter part of 2008.

GE has moved from $16 to $19 a share since December 1, and if they can keep their momentum, could reach the $21 strike price in about three months.

General Electric was trading at $18.57, gaining $0.24, or 1.28 percent, as of 2:41 PM EST.

Option Traders Riding Ford Motor (NYSE:F)

Option traders have been pouring money into Ford Motor (NYSE:F) this week as the share price of the company continues to climb. Traders believe Ford still has gas in the tank, and are buying calls to back up their convictions.

OptionMonster's real-time tracking systems revealed a total of 220,398 calls were made against 58,708 puts with Ford.

Vehicle sales leading the charge for Ford in December were the Fusion, the Edge and the F-150.

Ford was trading at $18.63, down $0.05, or 0.27 percent, as of 11:33 AM EST.