Thursday July 2, 2009



Bullish Motorola play in options action



Today's tickers: MOT, AXP, JOSB & ILMN



MOT - Motorola, Inc. - A large-volume bullish reversal initiated in the
October contract on MOT today suggests some investors are positioning for a
rally. Currently shares are off by more than 3% to stand to $6.25. Perhaps
traders are anticipating that Motorola's new lineup of phones, based on
Google's Android operating system, will boost sales for the firm. It appears
that approximately 15,000 puts were sold at the October 5.0 strike price for
14 cents apiece in order to partially fund the purchase of 15,000 calls at
the October 7.0 strike for 34 cents per contract. The net cost of the
bullish stance amounts to 20 cents. Thus, shares of MOT would need to rev
upward by 15% from the current price to $7.20 in order for investors to
profit by expiration. Interestingly, it appears that today's reversal has
been added to similar bullish positioning as seen in the open interest at
each of the strike prices described. Today's activity could be the work of
an investor who is merely adding to a position. Or, perhaps we are seeing
traders hopping on the bull-bandwagon.



AXP - American Express Company - The global payments and travel company
edged onto our 'most active by options volume' market scanner after one
bearish trader dug his claws into the August contract. AXP shares are down
1% to $22.75. It appears that the investor has sold 5,000 puts at the deep
in-the-money July 25 strike price for 2.54 apiece in order to get long of
7,500 puts at the closer-to-the-money August 23 strike price for 2.03 each.
The trader likely took profits on the sale of the near-term put options and
proceeded to reestablish a position in protective put options at a lower
strike with more time to expiration.



JOSB - Jos. A. Bank Clothiers, Inc. - The designer of men's clothing and
accessories has surrendered more than 6.5% to stand at $32.44 today. Traders
expecting further declines initiated interesting trades involving put
options. It appears that about 3,000 puts were sold short at the deep
in-the-money July 35 strike price for a premium of 2.19 apiece and spread
against the purchase of some 3,000 puts at the more bearish August 30 strike
price for 1.39 per contract. The net credit received from the transaction
amounts to 80 cents. Writing puts in the near-term July contract leaves
traders exposed to having shares of the underlying put to them at expiration
at an effective price of $34.20. This investor might be cutting losses
through the use of the 30 strike, meaning he can put shares to another
investor at that point. However, the trade possibly relies on the shares
price rallying back through $35 before expiration time arrives.



ILMN - Illumina Inc. - The biotechnology firm engaged in the development of
tools used for large-scale analysis of genetic variation and function has
plummeted about 11.5% to $33.76. Shares were nearly 18% lower in pre-market
trading after the company reported that its second-quarter revenue of $161
million failed to meet initial estimates of $168-$173 million. Option
traders took advantage of the bearish decline by selling about 3,000 calls
at the near-term July 35 strike for an average premium of 46 cents apiece.
The full premium enjoyed by call-writers will be fully retained as long as
the July 35 calls remain out-of-the-money by expiration in a few weeks.



Andrew Wilkinson
Caitlin Duffy

Senior Market Analyst
Equity Options Analyst

ibanalyst@interactivebrokers.com




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