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U.S. stock market report
1341 ET 15Nov2011 Frontier Communications puts gain traction
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Options traders appear to be building up bearish positions in rural
telephone services provider Frontier Communications for the second
straight session, with shares in the company down 1.61 percent to $5.47 in the
afternoon session.
Investors positioning for more losses in the stock within the next few
months are accumulating sizable positions in the closest-to-the-money strike
put available in the February contract, said Interactive Brokers Group options
analyst Caitlin Duffy. It appears one investor snapped up more than 4,500 puts
at the February 2012 $5 strike for a premium of 35 cents each and the buyer may
profit at expiration next year if shares breach the break-even point on the
downside at $4.65, she said. Duffy noted that bearish trading in the same
February $5 strike put occurred in the final 10 minutes of trading on Monday.
It appears one investor purchased a block of 5,000 puts for a 30-cent premium
on Monday. 'Both positions, which may or may not have been initiated by the
same investor, could yield profits at expiration in the event that Frontier's
shares decline to their lowest levels in nearly a decade,' Duffy said. The $5
strike puts in the January and May expirations were also active on Tuesday.
Overall volume was 4.2 times the norm with 11,000 puts and only 397 calls
traded by late afternoon, Trade Alert data showed.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1251 ET 15Nov2011 GameStop bear bets on post-earnings pullback
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The rest of the trading week is unlikely to be all fun and games for
shareholders in GameStop Corp, according to bearish trading in its puts
on Tuesday morning, said Interactive Brokers Group options analyst Caitlin
Duffy.
Shares of the largest video game retailer fell 2.6 percent to $23.99 in the
early afternoon session and protective or perhaps outright bearish positioning
in GameStop options occurred heading into the company's third-quarter earnings
report slated for Thursday before the opening bell. It appears the buyer of a
debit put spread in the front month is prepared for shares to head lower
following the results, she said.
Duffy noticed that the investor responsible for most of the volume in
GameStop options in the first half of the trading session purchased a 1,000-lot
November $23-$24 put spread for a net premium of 30 cents per contract. The
trader makes money if shares settle below the effective break-even price of
$23.70 at expiration this Friday. Maximum potential profits of 70 cents per
contract are available to the put player if shares settle below $23.00 at
expiration, Duffy said.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
1137 ET 15Nov2011-Put sellers suggest confidence in Career Education
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Option traders appeared to be positioning for the shares of for-profit
education group Career Education Corp to hold above recent lows
through December expiration.
The stock attracted unusual option activity early Tuesday, with opening put
sellers accounting for a majority of the volume, said Patrick Mortimer,
director of option trading at Pipeline Trading Systems.
The December $7 strike puts traded more than 8,800 contracts. With a
majority of the strike's activity taking place on the bid price of 20 cents, it
appeared that at least one investor was placing a bet that shares would remain
above $7 over the next five weeks, allowing the trade initiator to pocket the
premium collected, Mortimer added.
Total volume was 4.3 times typical levels, with about 10.000 puts and 88
calls in Career Education crossing the tape near midpoint in Tuesday's session,
according to Trade Alert.
Career Education's shares lost nearly one-half of their value earlier this
month following dismal third-quarter results, leading to the resignation of the
chief executive. For details, see.
The shares posted a new 52-week low of $6.92 after the news. 'Today's
option player(s) are banking on the shares to hold this recent low between now
and December expiry,' Mortimer said. The stock fell 1.2 percent to 8.16.
Reuters Messaging: doris.frankel.reuters.com@reuters.net
Keywords: MARKETS STOCKSNEWS
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